10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

for the Quarterly Period ended September 30, 2018

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

TRANSENTERIX, 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.)
635 Davis Drive, Suite 300, Morrisville, NC	27560
(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, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “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 of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ☐     No   ☒

216,119,434 shares of the Company’s common stock, par value $0.001 per share, were outstanding as of November 2, 2018.

TRANSENTERIX, INC.

TABLE OF CONTENTS FOR FORM 10-Q

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Operations and Comprehensive Loss (unaudited)	1
	Consolidated Balance Sheets (unaudited)	2
	Consolidated Statements of Stockholders’ Equity (unaudited)	3
	Consolidated Statements of Cash Flows (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosure	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
	SIGNATURES	40

i

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 (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. 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 Consolidated Financial Statements “and “Risk Factors” in this report, as well as the disclosures made in the TransEnterix, Inc. Annual Report on Form 10-K for the year ended December 31, 2017 filed on March 8, 2018, or the Fiscal 2017 Form 10-K, and other filings we make with the Securities and Exchange Commission, or 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. References in this report to “we,” “our,” “us,” or the “Company” refer to TransEnterix, Inc., including its subsidiaries, TransEnterix International; TransEnterix Italia S.r.l.; TransEnterix Europe S.à.R.L; TransEnterix Asia Pte. Ltd.; TransEnterix Taiwan Ltd; TransEnterix Japan KK and TransEnterix Israel Ltd.

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.

ii

TransEnterix, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Revenue	$	5,422		$	183		$	16,578		$	3,713
Cost of revenue		4,249			921			10,536			3,227
Gross profit (loss)		1,173			(738	)		6,042			486
Operating Expenses (Income)
Research and development		4,838			4,889			15,384			16,814
Sales and marketing		5,819			4,528			17,835			12,000
General and administrative		3,686			2,920			9,989			8,688
Amortization of intangible assets		2,674			1,821			8,244			5,144
Change in fair value of contingent consideration		(1,358	)		773			81			1,226
Issuance costs for warrants		—			—			—			627
Acquisition related costs		345			—			345			—
Gain from sale of SurgiBot assets, net		44			—			(11,915	)		—
Reversal of transfer fee accrual		(2,994	)		—			(2,994	)		—
Total Operating Expenses (Income)		13,054			14,931			36,969			44,499
Operating Loss		(11,881	)		(15,669	)		(30,927	)		(44,013	)
Other (Expense) Income
Change in fair value of warrant liabilities		(8,760	)		(22,887	)		(24,438	)		(25,213	)
Interest income		391			62			982			124
Interest expense		(685	)		(563	)		(3,398	)		(1,581	)
Other expense		(52	)		(194	)		(109	)		(294	)
Total Other (Expense) Income, net		(9,106	)		(23,582	)		(26,963	)		(26,964	)
Loss before income taxes	$	(20,987	)	$	(39,251	)	$	(57,890	)	$	(70,977	)
Income tax benefit		781			738			2,554			2,337
Net loss	$	(20,206	)	$	(38,513	)	$	(55,336	)	$	(68,640	)
Other comprehensive loss
Foreign currency translation (loss) gain		(561	)		2,952			(2,651	)		9,515
Comprehensive loss	$	(20,767	)	$	(35,561	)	$	(57,987	)	$	(59,125	)
Net loss per share - basic and diluted	$	(0.10	)	$	(0.26	)	$	(0.27	)	$	(0.51	)
Weighted average common shares outstanding - basic and diluted		209,088			149,516			204,531			134,622

See accompanying notes to consolidated financial statements.

1

TransEnterix, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)

	September 30,			December 31,
	2018			2017
	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	41,748		$	91,217
Short-term investments		39,670			—
Accounts receivable, net		5,669			1,536
Inventories		10,242			10,817
Interest receivable		51			80
Other current assets		9,039			9,344
Total Current Assets		106,419			112,994
Restricted cash		663			6,389
Property and equipment, net		6,659			6,670
Intellectual property, net		42,925			52,638
Goodwill		70,669			71,368
Other long term assets		224			192
Total Assets	$	227,559		$	250,251
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	2,785		$	3,771
Accrued expenses		7,432			10,974
Deferred revenue - current portion		1,270			1,088
Deferred gain from sale of SurgiBot assets		—			7,500
Contingent consideration – current portion		555			719
Notes payable - current portion, net of debt discount		—			4,788
Total Current Liabilities		12,042			28,840
Long Term Liabilities
Deferred revenue - less current portion		131			—
Contingent consideration – less current portion		11,549			11,699
Notes payable - less current portion, net of debt discount		19,106			8,385
Warrant liabilities		15,044			14,090
Net deferred tax liabilities		5,624			8,389
Total Liabilities		63,496			71,403
Commitments and Contingencies (Note 18)
Stockholders’ Equity
Common stock $0.001 par value, 750,000,000 shares authorized at    September 30, 2018 and December 31, 2017; 212,631,801 and 199,282,003    shares issued and outstanding at September 30, 2018 and    December 31, 2017, respectively		212			199
Additional paid-in capital		664,439			621,261
Accumulated deficit		(502,965	)		(447,640	)
Accumulated other comprehensive income		2,377			5,028
Total Stockholders’ Equity		164,063			178,848
Total Liabilities and Stockholders’ Equity	$	227,559		$	250,251

See accompanying notes to consolidated financial statements.

2

TransEnterix, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands)

(Unaudited)

	Common Stock				Treasury Stock					Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital			Deficit			Income			Equity
Balance, December 31, 2017		199,282	$	199		—		$	—	$	621,261		$	(447,640	)	$	5,028		$	178,848
Stock-based compensation		—		—		—			—		6,694			—			—			6,694
Issuance of common stock and warrants, net of    issuance costs		—		—		—			—		279			—			—			279
Exercise of stock options and warrants		11,028		11		—			—		34,869			—			—			34,880
Award of restricted stock units		1,036		1		—			—		—			—			—			1
Return of common stock to pay withholding taxes on    restricted stock		—		—		(537	)		(1)		(1,663	)		—			—			(1,664	)
Cancellation of treasury stock		—		—		537			1		—			—			—			1
Issuance of common stock related to sale of    SurgiBot assets		1,286		1		—			—		2,999			—			—			3,000
Cumulative effect of change in accounting    principle (Note 2)		—		—		—			—		—			11			—			11
Other comprehensive loss		—		—		—			—		—			—			(2,651	)		(2,651	)
Net loss		—		—		—			—		—			(55,336	)		—			(55,336	)
Balance, September 30, 2018		212,632	$	212		—			—	$	664,439		$	(502,965	)	$	2,377		$	164,063

See accompanying notes to consolidated financial statements.

3

TransEnterix, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2018			2017
Operating Activities
Net loss	$	(55,336	)	$	(68,640	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Gain from sale of SurgiBot assets, net		(11,915	)		—
Depreciation		1,876			1,816
Amortization of intangible assets		8,244			5,144
Amortization of debt discount and debt issuance costs		575			212
Amortization of held to maturity investment discount		(51	)		—
Stock-based compensation		6,694			5,321
Non-employee warrant awards		—			571
Deferred tax benefit		(2,572	)		(2,320	)
Loss on extinguishment of debt		1,400			308
Change in fair value of warrant liabilities		24,438			25,213
Change in fair value of contingent consideration		81			1,226
Recovery of transfer fee		(2,994	)		—
Changes in operating assets and liabilities:
Accounts receivable		(4,262	)		886
Interest receivable		28			79
Inventories		(1,276	)		(3,519	)
Other current and long term assets		27			(2,454	)
Accounts payable		(903	)		(1,599	)
Accrued expenses		(56	)		207
Deferred revenue		361			—
Net cash and cash equivalents used in operating activities		(35,641	)		(37,549	)
Investing Activities
Purchase of short-term investments		(39,619	)		—
Proceeds related to sale of SurgiBot assets, net		4,496			—
Purchase of property and equipment		(490	)		(1,488	)
Purchase of intellectual property		—			(418	)
Proceeds from sale of property and equipment		32			—
Net cash and cash equivalents used in investing activities		(35,581	)		(1,906	)
Financing Activities
Payment of notes payable		(15,305	)		(13,343	)
Proceeds from issuance of debt and warrants, net of issuance costs		18,828			12,956
Payment of contingent consideration		(395	)		(395	)
Proceeds from issuance of common stock and warrants, net of issuance costs		279			31,546
Taxes paid related to net share settlement of vesting of restricted stock units		(1,662	)		(168	)
Proceeds from issuance of common stock related to sale of SurgiBot assets		3,000			—
Proceeds from exercise of stock options and warrants		11,396			5,449
Net cash and cash equivalents provided by financing activities		16,141			36,045
Effect of exchange rate changes on cash and cash equivalents		(114	)		(311	)
Net decrease in cash, cash equivalents and restricted cash		(55,195	)		(3,721	)
Cash, cash equivalents and restricted cash, beginning of period		97,606			34,590
Cash, cash equivalents and restricted cash, end of period	$	42,411		$	30,869
Supplemental Disclosure for Cash Flow Information
Interest paid	$	1,135		$	597
Supplemental Schedule of Noncash Investing and Financing Activities
Transfer of inventories to property and equipment	$	2,160		$	—
Transfer of property and equipment to inventories	$	648		$	—
Issuance of common stock as contingent consideration	$	—		$	5,227
Relative fair value of warrants issued with debt	$	—		$	300
Reclass of warrant liability to common stock and additional paid-in capital	$	23,485		$	2,289
Cashless exercise of warrants	$	4,272		$	—

See accompanying notes to consolidated financial statements.

4

TransEnterix, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Capitalization

TransEnterix, Inc. (the “Company”) is a medical device company that is digitizing the interface between the surgeon and the patient to improve minimally invasive surgery by addressing the clinical and economic challenges associated with current laparoscopic and robotic options in today's value-based healthcare environment. The Company is focused on the commercialization of the Senhance™ Surgical System (the “Senhance System”), which digitizes laparoscopic minimally invasive surgery. The Senhance System allows for robotic precision, haptic feedback, surgeon camera control via eye sensing and improved ergonomics while offering responsible economics.

The Senhance System has been granted a CE Mark in Europe for laparoscopic abdominal and pelvic surgery, as well as limited thoracic operations excluding cardiac and vascular surgery. In April 2017, the Company submitted a 510(k) application to the FDA for the Senhance System. On October 13, 2017, the Company received 510(k) clearance from the FDA for use in laparoscopic colorectal and gynecologic surgery. In May 2018, the Company received 510(k) clearance from the FDA expanding the indications for use inlaparoscopic inguinal hernia and laparoscopic cholecystectomy (gallbladder removal) surgery. The Senhance System is available for sale in the U.S., the EU and select other countries.

The Senhance System is a multi-port robotic surgery system which 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. The system replicates laparoscopic motion that is familiar to experienced surgeons, and integrates three-dimensional high definition vision technology. The Senhance System also offers responsible economics to hospitals by offering robotic technology with reusable instruments thereby reducing additional costs per surgery when compared to other robotic solutions.

The Company also developed the SurgiBot™ System, a single-port, robotically enhanced laparoscopic surgical platform. On December 18, 2017, the Company announced that it had entered into an agreement with Great Belief International Limited (“GBIL”) to advance the SurgiBot System towards global commercialization.  The agreement transfers ownership of the SurgiBot System assets, while the Company retains 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 (“CFDA”), while entering into a nationwide distribution agreement with China National Scientific and Instruments and Materials Company (“CSIMC”) for the Chinese market.  The agreement provides the Company with proceeds of at least $29 million, of which $7.5 million was received in December 2017. An additional $7.5 million was received at the second closing in March 2018, which included a $3.0 million equity investment at $2.33 per share of common stock. The remaining $14.0 million, representing minimum royalties, will be paid beginning at the earlier of receipt of Chinese regulatory approval or five years after the second closing date.

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 which 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 International, Inc.; TransEnterix Italia S.r.l.; TransEnterix Asia Pte. Ltd.; TransEnterix Taiwan Ltd.; TransEnterix Japan KK and TransEnterix Israel Ltd.

5

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements 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. The results reported in these 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 financial statements and the notes thereto included in the Fiscal 2017 Form 10-K. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) have been condensed or omitted in the accompanying interim consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The accompanying Consolidated Financial Statements 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.Á.R.L; TransEnterix Asia Pte. Ltd.; TransEnterix Taiwan Ltd.; TransEnterix Japan KK and TransEnterix Israel Ltd. All inter-company accounts and transactions have been eliminated in consolidation.

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 identifiable intangible assets and goodwill, contingent consideration, warrant liabilities, stock compensation expense, revenue recognition, restructuring and other charges, excess and obsolete inventory reserves, and deferred tax asset valuation allowances.

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 at September 30, 2018 includes $663,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit cards and automobile leases. Restricted cash at December 31, 2017 includes $6.0 million in a money market account, held in connection with the Company’s notes payable and $389,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit card agreement and automobile leases.

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 September 30, 2018, short-term investments consisted of $39.7 million in U.S. government securities, all of which mature in less than a year. There were no investments as of December 31, 2017.

The Company reassesses the appropriateness of the classification of its investments at the end of each reporting period. The Company has determined that its debt securities should be classified as held-to-maturity as of September 30, 2018. This classification was based upon management’s determination that it has the positive intent and ability to hold the securities until their maturity dates, as the investments mature within 6 months and the underlying cash invested in these securities is not required for current operations. Due to the short-term maturities of these instruments, the amortized cost approximates the related fair values, which are based on level inputs as defined in Note 5. As of September 30, 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. No such impairment was recorded as of September 30, 2018.

6

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 cash deposits may at times exceed the FDIC 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 net revenue 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 but has not experienced significant losses to date. The Company had four customers who accounted for 88% of the Company’s net accounts receivable at September 30, 2018 and one customer who constituted 88% of the Company’s net accounts receivable at December 31, 2017. The Company had five customers who accounted for 68% of the Company’s net revenue for the nine months ended September 30, 2018 and two customers who constituted 89% of the Company’s net revenue for the nine months ended September 30, 2017. The Company had four customers who accounted for 96% of the Company’s net revenue for the three months ended September 30, 2018 and five customers who constituted 100% of the Company’s net revenue for the three months ended September 30, 2017.

Accounts Receivable

Accounts receivable are recorded at net realizable value, which includes an allowance for estimated uncollectable accounts. The allowance for uncollectible accounts was determined based on historical collection experience.

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.

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. This method approximates the period over which the Company expects to receive the benefit from these assets.  No impairment existed at September 30, 2018 or December 31, 2017.

Indefinite-lived intangible assets, such as goodwill, are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis at December 31 or when events or changes in circumstances indicate evidence a potential impairment exists, using a fair value based test. The Company continues to operate in one segment, which is considered to be the sole reporting unit and therefore, goodwill is tested for impairment at the enterprise level. No impairment existed at September 30, 2018 or December 31, 2017.

7

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 was acquired on September 21, 2015.

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 amortized based on their estimated useful lives.

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	Lesserof 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 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 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 contingent consideration is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss.

Deferred Gain from Sale of SurgiBot Assets

In conjunction with the agreement with GBIL in relation to the transfer of the SurgiBot System assets, the Company received $7.5 million in December 2017.  This amount was included in deferred gain from sale of SurgiBot assets in the consolidated balance sheet pending transfer of the assets in March 2018 and was recognized in gain from sale of SurgiBot assets in the consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2018.

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Warrant Liabilities

The Company’s Series B Warrants 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

The functional currency of the Company’s operational foreign subsidiaries is Euros. 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.

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 statement 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 nine months ended September 30, 2018 and 2017 were not significant.

Risk and Uncertainties

The Company is subject to a number of risks similar to other similarly-sized companies in the medical device industry. These risks include, without limitation, the historical lack of profitability; the Company’s ability to raise additional capital; 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, Italy, other countries in the European Union, and other countries in which the Company intends to operate; its ability to attract and retain key management, marketing and scientific personnel; competition from new entrants; 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.

Revenue Recognition

The Company adopted ASC Topic 606, Revenue from Contracts with Customers, on January 1, 2018. The Company’s revenue consists of product revenue resulting from the sale of systems, 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 system sale arrangements generally contain multiple products and services. For these bundled 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 bundled 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 system sale arrangements include a combination of the following performance obligations: system(s), system components, instruments, accessories, and system service. The Company’s 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. The Company considers the service terms in the arrangements that are legally enforceable to be performance obligations. Other than service, the Company generally satisfies all of the performance obligations up-front. System components, system accessories, instruments, accessories, and service are also sold on a standalone basis.

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The Company recognizes revenues 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 systems and system components sold directly to end customers, 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 systems sold through distributors, for which distributors are responsible for installation, revenue is recognized generally at the time of shipment. The Company’s system arrangements generally do not provide a right of return. The 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 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 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 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 types and geography:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
	(in thousands)				(in thousands)
	(unaudited)				(unaudited)
U.S.
Systems	$	868	$	—	$	1,742	$	—
Instruments and accessories		426		—		835		—
Services		87		—		137		—
Total U.S. revenue		1,381		—		2,714		—
Outside of U.S. ("OUS")
Systems		3,450		—		10,686		2,609
Instruments and accessories		441		10		2,653		683
Services		150		173		525		421
Total OUS revenue		4,041		183		13,864		3,713
Total
Systems		4,318		—		12,428		2,609
Instruments and accessories		867		10		3,488		683
Services		237		173		662		421
Total revenue	$	5,422	$	183	$	16,578	$	3,713

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

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 $4.4 million as of September 30, 2018.

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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. Contract assets are included in accounts receivable and totaled $0.1 million and $0 as of September 30, 2018 and 2017, 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 for the nine months ended September 30, 2018 and 2017, that was included in the deferred revenue balance at the beginning of each reporting period was $0.3 million and $0.2 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.

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.

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.

Stock-Based Compensation

The Company follows ASC 718 “Stock Compensation” and ASC 505-50 “Equity-Based Payments to Non-employees”, which provide guidance in accounting for share-based awards exchanged for services rendered and requires companies to expense the estimated fair value of these awards over the requisite service period. For awards granted to non-employees, the Company determines the fair value of the stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

The Company recognizes compensation expense for stock-based awards based on estimated fair values on the date of grant for awards granted to employees. The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock options. 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 $6,694,000 and $5,321,000 for the nine months ended September 30, 2018 and 2017, respectively.

The TransEnterix, Inc. 2007 Incentive Compensation Plan (the “Plan”) was originally approved by the Company’s board of directors, (the “Board”) and adopted by the majority of the Company’s stockholders on November 13, 2007. The Plan has been subsequently amended, and approved by stockholders, as required, to increase the number of shares available under the Plan and to make other changes.  As of May 24, 2018, the date of the Company’s annual meeting of stockholders for 2018, the number of shares of common stock, par value $0.001 per share (the “Common Stock”), authorized under the Plan is 40,940,000.

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.

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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, the Company adjusted its 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, 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 estimates that the deemed repatriation will not result in any additional U.S. income tax liability as it estimates it currently has no undistributed foreign earnings.

In accordance with Staff Accounting Bulletin (“SAB”) No. 118, income tax effects of the Tax Legislation may be refined upon obtaining, preparing, or analyzing additional information during a measurement period of one year.  During the measurement period provisional amounts may be adjusted for the effects, if any, of interpretive guidance issued after December 31, 2017, by U.S. regulatory and standard-setting bodies.

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 one 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 60% of the Company’s total consolidated assets are located within the U.S. as of September 30, 2018 and December 31, 2017. The remaining assets are mostly located in Europe and are primarily related to the Company’s facility in Italy, and include goodwill, intellectual property, other current assets, property and equipment, cash, accounts receivable and inventory of $91.8 million and $99.9 million at September 30, 2018 and December 31, 2017, respectively. Total assets outside of the U.S. excluding goodwill amounted to 31% of total consolidated assets at September 30, 2018 and December 31, 2017. The Company recognizes sales by geographic area based on the country in which the customer is based. For the nine months ended September 30, 2018, 16% of net revenue was generated in the U.S. and 83% was generated in Europe. For the nine months ended September 30, 2017, 62% of net revenue was generated in Europe and 38% in Asia.    

Impact of Recently Issued Accounting Standards  

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing this ASU and has not yet determined the impact ASU 2018-13 may have on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company is currently assessing this ASU and has not yet determined the impact ASU 2018-07 may have on its consolidated financial statements.

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 feature will no longer need to be considered when determining whether certain financial instruments or embedded features should be classified as liabilities

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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 should not have a material impact on the consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) which addresses changes to reduce the presentation diversity of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees.  The guidance became effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period. The new standard will be applied retrospectively, but may be applied prospectively if retrospective application would be impracticable. The adoption of this ASU did not have an impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. The new standard 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 all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In July 2018, the FASB issued ASU 2018-10, which provides narrow-scope improvements to the lease standard. We expect to elect the ‘package of practical expedients’, which permits us to forgo reassessment of our prior conclusions about lease identification, lease classification and initial direct costs for leases entered into prior to the effective date. Additionally, we expect to elect the practical expedient to not provide comparative reporting periods; therefore, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We do not expect to elect the ‘use-of-hindsight practical expedient’ or the land easement transition relief, the latter of which is not applicable to our industry. Upon adoption, operating leases will be reported on the statement of financial position as gross-up assets and liabilities. The Company has begun evaluating and planning for adoption and implementation of this ASU, including reviewing all material leases, the ASU practical expedient guidelines and current accounting policy elections, and assessing the overall financial statement impact. We expect this ASU will have a material impact on the Company’s financial position. The impact on the Company’s results of operations is currently being evaluated. The impact of this ASU is non-cash in nature and is not expected to affect the Company’s cash flows.

In February 2017, the FASB issued ASU No. 2017-05, Other Income — Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) — Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The new standard clarifies the scope of guidance applicable to sales of nonfinancial assets and also provides guidance on accounting for partial sales of such assets.  The adoption of this ASU did not have an impact on the consolidated financial statements.

The Company adopted the New Revenue Standard in the first quarter of fiscal year 2018 using the modified retrospective method resulting in a cumulative catch-up adjustment to opening retained earnings.  The Company applied the New Revenue Standard to all contracts and concluded that the timing and measurement of revenue recognition is materially consistent under the New Revenue Standard, except for the future billings related to future service included in its multi-year contracts that should be part of the consideration allocated to all performance obligations under the New Revenue Standard. Under the prior standard, future service billings were considered to be contingent revenue, and therefore, were not included in the consideration allocated. Accordingly, the amount of consideration allocated to the performance obligations identified in the Company’s system arrangements is different under the New Revenue Standard than the amount allocated under the prior standard. In general, this will result in an acceleration of the amount of revenue recognized for system sales with multi-year service contracts. Due to limited sales to date, the Company recorded a $11,000 cumulative catch-up adjustment to retained earnings in the first quarter of fiscal year 2018, offset by reductions in accounts receivable of $4,000 and deferred revenue of $15,000. Under the prior standard, revenue would have been $15,000 greater for the nine months ended September 30, 2018 than under the New Revenue Standard.

Reclassifications

Certain prior year amounts within the consolidated statement of operations and comprehensive loss have been reclassified.  Such reclassifications have no effect on previously recorded net loss.

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Classification of Certain Items Within the Company’s Form 10-K

Certain reclassifications of prior period amounts will be made within the Company’s Form 10-K filing for the year ended December 31, 2018 to conform to current period presentation. Specifically, during the nine months ended September 30, 2018, the Company determined that the amount related to the deferred gain on sale of SurgiBot assets as reflected within one line in the operating activities section of the consolidated statement of cash flows for the year ended December 31, 2017 should have been classified as cash flows provided from investing activities.  There is no impact to the consolidated statements of operations or consolidated balance sheets. The Company evaluated the effect of this misclassification and concluded it was not material to any of its previously issued consolidated financial statements. Upon revision, cash flows from operating activities for the year ended December 31, 2017, will decrease by $7.5 million to cash and cash equivalents used in operating activities of $47.3 million and cash flows from investing activities will increase by $7.5 million to cash and cash equivalents provided by investing activities of $5.5 million.  There is no impact of the reclassification to the nine months ended September 30, 2017.

3. Acquisition of 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 and changed the name of the acquired company from Vulcanos S.r.l. to TransEnterix Italia S.r.l.

Under the terms of the Purchase Agreement, the consideration consisted of the issuance of 15,543,413 shares of the Company’s common stock (the “Securities Consideration”) and approximately $25.0 million U.S. Dollars and €27.5 million Euro in cash consideration (the “Cash Consideration”). The Securities Consideration was issued in full at the closing of the Senhance Acquisition; the Cash Consideration was or will be paid in four tranches, as follows:

(1) $25.0 million of the Cash Consideration, which was paid at closing.

(2) 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”). Under the Amendment, the Second Tranche was restructured to be paid through the (A) the issuance of 3,722,685 shares of the Company’s common stock with an aggregate fair market value of €5.0 million and (B) the payment of €5.0 million in cash upon the occurrence of either (i) receipt of clearance from the FDA for the Senhance System; or (ii) the Company having cash on hand of at least $50.0 million, or (iii) successfully completing a financing, raising at least $50.0 million in gross proceeds after September 2015, exclusive of any financing proceeds related to the December 2016 purchase agreement between the Company and Lincoln Park Capital Fund, LLC; with payment of simple interest at a rate of 9.0% per annum beginning on December 31, 2016. The Five Million Euro (€5,000,000) cash payment began to accrue simple interest at a rate of 9% per annum beginning on December 31, 2016 and continued to accrue interest until November 15, 2017 when it was paid in full.

(3) The third tranche of the Cash Consideration (the “Third Tranche”) of €15.0 million 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.

(4) 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, 2016. As of September 30, 2018, the Company had paid €2.1 million of the fourth tranche.

The Third Tranche payments will be accelerated in the event that (i) the Company or TransEnterix 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 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.

The Senhance Acquisition was accounted for as a business combination utilizing the methodology prescribed in ASC 805. The purchase price for the Senhance Acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values.

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4. Cash, Cash Equivalents, and Restricted Cash

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

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Cash	$	6,987	$	4,039
Money market		34,761		87,178
Total cash and cash equivalents	$	41,748	$	91,217
Restricted cash	$	663	$	6,389
Total	$	42,411	$	97,606

Restricted cash at September 30, 2018 includes $663,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit card agreement and automobile leases. Restricted cash at December 31, 2017 includes $6.0 million in a money market account, held in connection with the Company’s notes payable and $389,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit card agreement and automobile leases.

5. 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 820-10 (“Fair Value Measurement Disclosure”) requires the valuation using a three-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 nine months ended September 30, 2018 and the year ended December 31, 2017.

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 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, accounts payable, and certain accrued expenses at September 30, 2018 and December 31, 2017, 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 September 30, 2018 and December 31, 2017, as the interest rates on the notes payable approximate the rates available to the Company as of these dates.

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The following are the major categories of assets measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

	September 30, 2018
	(In thousands)
	(unaudited)
Description	QuotedPrices 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	$	41,748	$	—	$	—	$	41,748
Restricted cash		663		—		—		663
Total Assets measured at fair value	$	42,411	$	—	$	—	$	42,411
Liabilities measured at fair value
Contingent consideration	$	—	$	—	$	12,104	$	12,104
Warrant liabilities		—		—		15,044		15,044
Total liabilities measured at fair value	$	—	$	—	$	27,148	$	27,148

	December 31, 2017
	(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	$	91,217	$	—	$	—	$	91,217
Restricted cash		6,389		—		—		6,389
Total Assets measured at fair value	$	97,606	$	—	$	—	$	97,606
Liabilities measured at fair value
Contingent consideration	$	—	$	—	$	12,418	$	12,418
Warrant liabilities		—		—		14,090		14,090
Total liabilities measured at fair value	$	—	$	—	$	26,508	$	26,508

The Company’s financial liabilities consisted of contingent consideration potentially payable to Sofar related to the Senhance Acquisition in September 2015 (Note 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 the income approach, using various revenue and cost assumptions and applying a probability to each outcome. The change in fair value of the contingent consideration of $0.1 million for the nine months ended September 30, 2018 was primarily due to a change in the estimated discount rate, the effect of the passage of time on the fair value measurement and the impact of foreign currency exchange rates. The change in fair value of the contingent consideration of $1.2 million for the nine months ended September 30, 2017 was primarily due to the change in discount rate, effect of the passage of time on the fair value measurement and the impact of foreign currency exchange rates. Adjustments associated with the change in fair value of contingent consideration are included in the Company’s consolidated statements of operations and comprehensive loss.

On April 28, 2017, the Company sold 24.9 million units (the “Units”), each consisting of one share of the Company’s Common Stock, a Series A warrant to purchase one share of Common Stock with an exercise price of $1.00 per share  (the “Series A Warrants”), and a Series B warrant to purchase 0.75 shares of Common Stock with an exercise price of $1.00 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. Each Series B Warrant 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.

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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%, no dividends, volatility of 73.14%, and share price of $0.65 per share based on the trading price of the Company’s Common Stock. All Series A Warrants were exercised as of December 31, 2017.

The change in fair value of warrants for the nine months ended September 30, 2018 and 2017 of $24.4 million and $25.2 million, respectively was included in the Company’s consolidated statement of operations and comprehensive loss. The following table presents the inputs and valuation methodologies used for the Company’s fair value of the Series B warrants:

					April 28, 2017
Series B	September 30, 2018		December 31, 2017		(date of issuance)
Fair value	$15.0 million		$14.1 million		$6.2 million
Valuation methodology	Monte Carlo		Monte Carlo		Black-Scholes Merton
Term	3.58 years		4.33 years		5 years
Risk free rate	2.90%		2.13%		1.81%
Dividends		—		—		—
Volatility	89.47%		80.60%		73.14%
Share price	$	5.80	$	1.93	$	0.65
Probability of additional financing	100% in 2019		25% in 2018 and 75% in 2019		Not Applicable

The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements classified in Level 3, with the exception of the warrant liability, which is explained above as of September 30, 2018 and December 31, 2017:

	Valuation Methodology	Significant Unobservable Input	WeightedAverage (range, if applicable)
Contingent  consideration	Probabilityweighted income approach	Milestone dates	2018 to2021
		Discount rate Probabilityofoccurrence	9% to 12% 100%

The following table summarizes the change in fair value, as determined by Level 3 inputs, for all assets and liabilities using unobservable Level 3 inputs for the nine months ended September 30, 2018:

	Fair Value Measurementat Reporting Date (Level 3)
	(In thousands)
	(unaudited)
	Common stock			Contingent
	warrants			consideration
Balance at December 31, 2017	$	14,090		$	12,418
Exercise of warrants		(23,484	)		—
Change in fair value		24,438			81
Payment for contingent consideration		—			(395	)
Balance at September 30, 2018	$	15,044		$	12,104
Current portion		—			555
Long-term portion		15,044			11,549
Balance at September 30, 2018	$	15,044		$	12,104

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6. Accounts Receivable, Net

The following table presents the components of accounts receivable:

	September 30,			December 31,
	2018			2017
	(In thousands)
	(unaudited)
Gross accounts receivable	$	5,742		$	1,609
Allowance for uncollectible accounts		(73	)		(73	)
Total accounts receivable, net	$	5,669		$	1,536

7. Inventories

The components of inventories are as follows:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Finished goods	$	4,212	$	4,432
Raw materials		6,030		6,385
Total inventories	$	10,242	$	10,817

8. Other Current Assets

The following table presents the components of other current assets:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Advances to vendors	$	6,406	$	6,403
Prepaid expenses		2,540		1,519
Other receivables		93		1,422
Total	$	9,039	$	9,344

9. Property and Equipment

Property and equipment consisted of the following:

	September 30,			December 31,
	2018			2017
	(In thousands)
	(unaudited)
Machinery, manufacturing and demonstration equipment	$	12,095		$	10,866
Computer equipment		2,260			2,187
Furniture		628			598
Leasehold improvements		2,273			2,237
Total property and equipment		17,256			15,888
Accumulated depreciation and amortization		(10,597	)		(9,218	)
Property and equipment, net	$	6,659		$	6,670

Depreciation expense was $1,876,000 and $1,816,000, for the nine months ended September 30, 2018 and 2017, respectively.

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

Goodwill

Goodwill of $93.8 million was recorded in connection with the Merger, as described in Note 1, and goodwill of $38.3 million was recorded in connection with the Senhance Acquisition, as described in Note 3. The carrying value of goodwill and the change in the balance for the nine months ended September 30, 2018 is as follows:

	Goodwill
	(Inthousands)
	(unaudited)
Balance at December 31, 2017	$	71,368
Foreign currency translation impact		(699	)
Balance at September 30, 2018	$	70,669

Accumulated impairment of goodwill as of September 30, 2018 and December 31, 2017 was $61.8 million. No impairment was recorded as of September 30, 2018 and December 31, 2017.  

During the second quarter of 2017, the Company’s stock price experienced a significant decline. The Company performed a Step 1 goodwill impairment test as of the second quarter of 2017 and determined that no charge to goodwill for impairment was required during such second quarter. As of December 31, 2017, the Company elected to bypass the qualitative assessment and calculated the fair value of the Company’s reporting unit, which exceeded the carrying amount. Accordingly, no charge for goodwill impairment was required as of December 31, 2017. No impairment indicators were noted during the nine months ended September 30, 2018.

In-Process Research and Development

As described in Note 3, 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 receipt of regulatory clearance to commercialize the products associated with the IPR&D assets in the United States, the assets were deemed definite-lived, transferred to developed technology and are amortized based on their estimated useful lives.

Intellectual Property

As described in Note 3, on September 21, 2015, the Company acquired all of the developed technology related to the Senhance System and recorded $48.5 million of intellectual property. The estimated fair value of the intellectual property 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.

In November 2016, the Company agreed to enter into a technology and patents purchase agreement with Sofar to acquire from Sofar certain technology and intellectual property rights related to the Senhance Acquisition, and formerly licensed by the Company.  The technology and patents were acquired in 2017 at an acquisition price of $400,000.

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The components of gross intellectual property, accumulated amortization, and net intellectual property as of September 30, 2018 and December 31, 2017 are as follows:

	September 30, 2018									December 31, 2017
	(In thousands)									(In thousands)
			(unaudited)
	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		(27,936	)		4,074		42,551		66,413		(19,724	)		5,529		52,218
Technology and patents purchased		400		(62	)		36		374		400		(30	)		50		420
Total intellectual property	$	66,813	$	(27,998	)	$	4,110	$	42,925	$	66,813	$	(19,754	)	$	5,579	$	52,638

The weighted average remaining useful life of the developed technology and technology and patents purchased was 4 years and 8.6 years, respectively as of September 30, 2018 and 4.8 years and 9.3 years, respectively as of December 31, 2017.  

11. Income Taxes

Income taxes have been accounted for using the asset and liability method in accordance with ASC 740 “Income Taxes”. The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate method. The Company estimates an annual effective tax rate of 5.0% for the year ending December 31, 2018. This rate does not include the impact of any discrete items.  The Company incurred losses for the nine month period ended September 30, 2018 and is forecasting additional losses through the year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2018. Due to the Company’s history of losses, there is not sufficient evidence to record a net deferred tax asset associated with the U.S., Luxembourg, Swiss, and Asian operations. Accordingly, a full valuation allowance has been recorded related to the net deferred tax asset in those jurisdictions. There is no net deferred tax asset recorded in relation to TransEnterix Italia and accordingly no valuation allowance has been recorded in that jurisdiction The deferred tax benefit during the nine months ended September 30, 2018 and 2017, was approximately $2.6 million and $2.3 million, respectively.

The Company’s effective tax rate for each of the nine-month periods ended September 30, 2018 and 2017 was 4.4% and 3.3%, respectively. At September 30, 2018, the Company had no unrecognized tax benefits that would affect the Company’s effective tax rate.

At September 30, 2018, the Company’s accounting for the 2017 Tax Cuts and Jobs Act is still in process; however, it expects to complete the accounting by December 2018. Updates to the Company’s calculations may result in changes to the provisional adjustments recorded at year-end.

12. Accrued Expenses

The following table presents the components of accrued expenses:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Compensation and benefits	$	4,975	$	4,533
Other		814		504
Deferred rent		437		595
Legal and professional fees		400		386
Consulting and other vendors		299		1,414
Taxes and other assessments		190		3,192
Interest		159		309
Royalties		158		41
Total	$	7,432	$	10,974

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13. Notes Payable

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 has agreed to make certain term loans to the Company in the aggregate principal amount of up to $40,000,000, with funding of the first $20,000,000 tranche occurring on May 23, 2018 (the “Initial Funding Date”). The Company will be eligible to draw on the second tranche of $10,000,000 upon achievement of certain Senhance System revenue-related milestones for its 2018 fiscal year, and a third tranche of $10,000,000 upon achievement of designated trailing six month GAAP net revenue from Senhance System sales. The Company is entitled to make interest-only payments until December 1, 2020, and at the end the interest-only period, the Company will be 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 will be required to be repaid if the term loans are accelerated following an event of default.

The term loans bear 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%. Following the draw of the third tranche, the Fixed Rate will be reduced to 9.20% effective on the first interest payment date to occur during the first fiscal quarter following the draw of the third tranche. On the Initial Funding Date, the Company was obligated to pay a facility fee of $400,000, recorded as a debt discount. In addition, the Company is 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 occurs 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 is required to pay a final fee of 6.95% of the aggregate principal amount of term loans funded. The final payment fee is 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 are to be guaranteed by all current and future material foreign subsidiaries of the Company and are 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 contains customary representations and covenants that, subject to exceptions, restrict 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 are not related to its existing business. Under the terms of the Hercules Loan Agreement, the Company is required to maintain cash and/or investment property in accounts which perfect 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 are more than 90 days past due and (ii) 80% of the aggregate cash of the Company and its consolidated subsidiaries. The Agent is granted the option to invest up to $2,000,000 in any future equity offering broadly marketed by the Company to investors on the same terms as the offering to other investors.

In connection with its entrance into 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 loss of $1.4 million on the extinguishment of notes payable which is included in interest expense on the consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2018. The Company paid $680,000 in final payment obligations and $287,000 in prepayment fees under the Innovatus Loan Agreement upon repayment.

Under the Innovatus Loan Agreement, entered into on May 10, 2017, Innovatus agreed to make certain term loans in the aggregate principal amount of up to $17,000,000. Funding of the first $14,000,000 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) 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 funding, the Company paid a facility fee of $170,000 on the date of funding of the first tranche and incurred additional debt issuance costs of approximately $1.2 million, recorded as debt discount.  In addition, the Company issued warrants to the Lender to purchase shares of the Company’s common stock that will expire five (5) years from such issue date. The warrants issued in connection with funding of the first tranche entitle the Lender to purchase up to 1,244,746 shares of the Company’s common stock at an exercise price of $1.00 per share. The Company estimated the fair value of the warrants to be $300,000. 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 September 30, 2018 and December 31, 2017, the unamortized debt discount was $0 and $1.0 million, respectively.

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In connection with its entrance into the Innovatus Loan Agreement, the Company repaid its then-existing credit facility with Silicon Valley Bank and Oxford Finance LLC, which loan and security agreement, as subsequently amended and restated is referred to as the “SVB Loan Agreement.” The Company recognized a loss of $308,000 on the extinguishment of notes payable which is included in interest expense on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2017. The Company paid $1.3 million in final payment obligations and $255,000 in facility fees under the SVB Loan Agreement upon repayment.

In connection with the issuance of the notes payable and amendments under the SVB Loan Agreement, the Company incurred approximately $371,000 in debt issuance costs paid to Silicon Valley Bank and Oxford Finance and third parties and $280,000 in debt issuance costs related to issuance of warrants to such prior lenders. The unamortized balance of $107,000 as of December 31, 2016, was amortized using the effective interest method, until the debt was extinguished in May 2017. At the time of extinguishment in May 2017, $63,000 of unamortized debt issuance costs were included in the loss on extinguishment of notes payable.

14.Warrants

The following table summarizes the change in warrants for the nine months ended September 30, 2018:

						Weighted
				Weighted		Average		Weighted
				Average		Remaining		Average
	Number of			Exercise		Contractual		Grant Date
	Warrants			Price		Life (in years)		Fair Value
Outstanding at December 31, 2017		13,162,668		$	1.08		4.5	$	0.39
Exercised		(8,562,631	)		1.09		—		—
Cancelled		(95,600	)		1.65		—		—
Outstanding at September 30, 2018		4,504,437			1.03		4.0	$	0.26

In connection with the borrowings under the SVB Loan Agreement, the Company issued warrants to Silicon Valley Bank and Oxford Finance to purchase shares of the Company’s Common Stock amounting to an aggregate of 430,815 warrants under the SVB Loan Agreement. The warrants expire seven years from their respective issue date.  In February 2018, the Company terminated its relationship with a vendor who had been issued warrants to acquire 950,000 shares of Common Stock (the “Service Warrants”) with staggered vesting requirements.  As part of the termination agreement, the Company accelerated the full vesting of the Service Warrants.

15. Purchase Agreement, Controlled Equity Offering and Public Offering of Common Stock

On April 28, 2017, the Company sold 24.9 million units, each consisting of one share of the Company’s Common Stock, a Series A warrant to purchase one share of Common Stock, and a Series B warrant to purchase 0.75 shares of Common Stock, at a public offering price of $1.00 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 no exercise of the warrants. The closing of the public offering occurred on May 3, 2017.

On December 16, 2016, the Company entered into a purchase agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC, (“Lincoln Park”), pursuant to which the Company had the right to sell to Lincoln Park up to an aggregate of $25.0 million in shares of the Company’s Common Stock, subject to certain limitations and conditions set forth in the LPC Purchase Agreement. The Company issued to Lincoln Park 345,421 shares of Common Stock as commitment shares in consideration for the LPC Purchase Agreement through April 27, 2017. Sales under the LPC Purchase Agreement for the year ended December 31, 2016 were 300,000 shares, with gross proceeds of $412,500 and net proceeds of $392,500. Sales under the LPC Purchase Agreement for the year ended December 31, 2017 were 3,972,741 shares, with gross and net proceeds of $5,304,000. Effective April 27, 2017, the Company terminated the LPC Purchase Agreement. The LPC Purchase Agreement provided the Company with an election to terminate the Purchase Agreement for any reason or for no reason by delivering a notice to Lincoln Park, and the Company did not incur any early termination penalties in connection with the termination of the LPC Purchase Agreement.

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On August 31, 2017, the Company entered into an At-the-Market Equity Offering Sales Agreement (the “2017 Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”), as sales agent, pursuant to which the Company can sell through Stifel, from time to time, up to $50.0 million in shares of Common Stock in an at-the-market offering. The Company pays Stifel a commission of approximately 3% of the aggregate gross proceeds received from all sales of common stock under the 2017 Sales Agreement. Unless otherwise terminated earlier, the 2017 Sales Agreement continues until all shares available under the Sales Agreement have been sold.

The following table summarizes the total sales under the 2017 Sales Agreement for the periods indicated (in thousands, except per share amounts):

	2017 Sales Agreement
	Year Ended December 31, 2017
Total shares of common stock sold		15,998.5
Average price per share	$	3.13
Gross proceeds	$	50,000
Commissions earned by Stifel	$	1,500
Other issuance costs	$	97

16. Basic and Diluted Net Loss per Share

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 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. In computing diluted net loss per share for the nine months ended September 30, 2018 and 2017, no adjustment has been made to the weighted average outstanding common shares as the assumed exercise of outstanding options, warrants and restricted stock units would be anti-dilutive.

17. Related Person Transactions

On September 18, 2015, TransEnterix Italia entered into a services agreement for receipt of administrative services from Sofar and payment of rent to Sofar, a stockholder that owned approximately 9% and 12% of the Company’s Common Stock at September 30, 2018 and 2017, respectively. Expenses for administrative services were approximately $0 and $52,000 for the nine months ended September 30, 2018 and 2017, respectively. The services agreement terminated in 2017.

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. On December 30, 2016, the Company entered into an Amendment to the Senhance Acquisition purchase agreement with Sofar 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 3,722,685 shares of the Company’s Common Stock with an aggregate fair market value of €5.0 million.  On January 4, 2017, the Company issued to Sofar 3,722,685 shares of the Common Stock with a fair value of €5.0 million. The price per share was $1.404 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.

In March 2018, TransEnterix Europe entered into a Service Supply Agreement with 1Med 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 1Med S.A. Expenses under the Service Supply Agreement were approximately $62,000 for the nine months ended September 30, 2018.

18. 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 regulatory and 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 3,722,685 shares of the Company’s Common Stock with an aggregate fair market value of €5.0 million.  As of December 31, 2017, the fair value of the contingent consideration was $12.4 million. On September 30, 2018, the fair value of the contingent consideration was $12.1 million.

23

Legal Proceedings 

No liability or related charge was recorded to earnings in the Company’s consolidated financial statements for legal contingencies for the nine months ended September 30, 2018 or the year ended December 31, 2017, as all pending litigation, including two putative derivative claims, was dismissed in 2017 with prejudice in the Company's favor.

19. Subsequent Events

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, including the intellectual property assets (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 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-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. 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 3.15 million shares of the Company’s common stock. A second tranche of $6.6 million in additional consideration will be payable in cash, stock or cash and stock, at the discretion of the Company, within one year after the closing date.

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.

On October 23, 2018, Hercules funded the Second Tranche of $10,000,000 under the Hercules Loan Agreement.  The Second Tranche funding remains subject to all terms and conditions under the Hercules Loan Agreement.

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ITEM 2. 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 consolidated financial statements and the related notes to our 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

TransEnterix is a medical device company that is digitizing the interface between the surgeon and the patient to improve minimally invasive surgery by addressing the clinical and economic challenges associated with current laparoscopic and robotic options in today's value-based healthcare environment. The Company is focused on the commercialization of the Senhance™ System, which digitizes laparoscopic minimally invasive surgery. The Senhance System allows for robotic precision, haptic feedback, surgeon camera control via eye sensing and improved ergonomics while offering responsible economics.

The Senhance System has been granted a CE Mark in Europe for laparoscopic abdominal and pelvic surgery, as well as limited thoracic operations excluding cardiac and vascular surgery. In April 2017, the Company submitted a 510(k) application to the FDA for the Senhance System. On October 13, 2017, the Company received 510(k) clearance from the FDA for use in laparoscopic colorectal and gynecologic surgery.  These indications cover 23 procedures, including benign and oncologic procedures. In May 2018, the Company received 510(k) clearance from the FDA expanding the indications for use inlaparoscopic inguinal hernia and laparoscopic cholecystectomy (gallbladder removal) surgery. The Senhance System is available for sale in the U.S., the EU and select other countries.

The Senhance System is a multi-port robotic surgery system which 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. The system replicates laparoscopic motion that is familiar to experienced surgeons, and integrates three-dimensional high definition vision technology. The Senhance System also offers responsible economics to hospitals by offering robotic technology with reusable instruments thereby reducing additional costs per surgery when compared to other robotic solutions.

The Company has also developed the SurgiBot System, a single-port, robotically enhanced laparoscopic surgical platform. On December 18, 2017, the Company announced that it had entered into an agreement with GBIL to advance the SurgiBot System towards global commercialization.  The agreement transfers ownership of the SurgiBot System assets, while the Company retains 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 CFDA while entering into a nationwide distribution agreement with CSIMC for the Chinese market.  The agreement provides the Company with proceeds of at least $29 million, of which $7.5 million was received in December 2017 and an additional $7.5 million including a $3.0 million equity investment at $2.33 per share of common stock, was received at the second closing in March 2018. The remaining $14.0 million, representing minimum royalties, will be paid beginning at the earlier of receipt of Chinese regulatory approval or five years after the second closing.

We believe that future outcomes of minimally invasive surgery will be enhanced through our 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 applications. Our strategy is to focus on the commercialization and further development of the Senhance System.

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.

Since inception, we have been unprofitable. As of September 30, 2018, we had an accumulated deficit of $503.0 million.

We expect to continue to invest in research and development and sales and marketing and increase selling, general and administrative expenses as we grow. As a result, we will need to generate significant revenue in order to achieve profitability.

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Debt Refinancing  

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 Hercules Loan Agreement (collectively, the “Lender”) and Hercules Capital, Inc., as administrative agent and collateral agent (the “Agent”). Under the Hercules Loan Agreement, the Lender has agreed to make certain term loans to the Company in the aggregate principal amount of up to $40,000,000, with funding of the first $20,000,000 tranche occurring on May 23, 2018 (the “Initial Funding Date”). The Company will be eligible to draw on the second tranche of $10,000,000 upon achievement of certain Senhance System revenue-related milestones for its 2018 fiscal year, and a third tranche of $10,000,000 upon achievement of designated trailing six month GAAP net revenue from Senhance System sales. The Company is entitled to make interest-only payments until December 1, 2020, and at the end the interest-only period, the Company will be 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 will be required to be repaid if the term loans are accelerated following an event of default. The Company is in compliance with its debt covenants under the Hercules Loan Agreement as of September 30, 2018.

The term loans bear 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%. Following the draw of the third tranche, the Fixed Rate will be reduced to 9.20% effective on the first interest payment date to occur during the first fiscal quarter following the draw of the third tranche. On the Initial Funding Date, the Company was obligated to pay a facility fee $400,000. In addition, the Company is permitted to prepay the term loans in full at any time, with a prepayment fee of 3.0% of the outstanding principal amount of loan in the first year after the Initial Funding Date, 2.0% if the prepayment occurs 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 is required to pay a final fee of 6.95% of the aggregate principal amount of term loans funded.

The Company’s obligations under the Hercules Loan Agreement are to be guaranteed by all current and future material foreign subsidiaries of the Company and are 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 contains customary representations and covenants that, subject to exceptions, restrict the Company’s and its subsidiaries’ ability to do the following, among 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 are not related to its existing business. Under the terms of the Hercules Loan Agreement, the Company is required to maintain cash and/or investment property in accounts which perfect 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 are more than 90 days past due and (ii) 80% of the aggregate cash of the Company and its consolidated subsidiaries. The Agent is granted the option to invest up to $2,000,000 in any future equity offering broadly marketed by the Company to investors on the same terms as the offering to other investors.

In connection with its entrance into the Hercules Loan Agreement, the Company repaid its existing credit facility with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”) entered into on May 10, 2017, which loan and security agreement is referred to as the Innovatus Loan Agreement (the “Innovatus Loan Agreement”).

Under the Innovatus Loan Agreement, the Lender has agreed to make certain term loans in the aggregate principal amount of up to $17,000,000. Funding of the first $14,000,000 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) the Company’s failure to achieve an Interest-Only Milestone. At the end of the interest-only period, the Company would have been 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 funding, the Company paid a facility fee of $170,000 on the date of funding of the first tranche.  In addition, the Company issued warrants to the Lender to purchase shares of the Company’s common stock.  Additional warrants will be issued on the funding date of each subsequent tranche and will expire five (5) years from such issue date. The warrants issued in connection with funding of the first tranche entitle the Lender to purchase up to 1,244,746 shares of the Company’s common stock at an exercise price of $1.00 per share.

In connection with its entrance into the Innovatus Loan Agreement, the Company repaid its then-existing credit facility with Silicon Valley Bank and Oxford Finance LLC under the SVB Loan Agreement.

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Public Offering of Units

On April 28, 2017, we entered into an underwriting agreement with Stifel, Nicolaus & Company, Incorporated, or the Underwriter, relating to an underwritten public offering of an aggregate of 24,900,000 Units, each consisting of one share of the Company’s Common Stock, a Series A Warrant to purchase one share of Common Stock and a Series B Warrant to purchase 0.75 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.

Each Series A Warrant had an initial exercise price of $1.00 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 has an initial exercise price of $1.00 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 September 30, 2018, Series B Warrants representing approximately 15.8 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. 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.

The underwriting agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriters, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the underwriting agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties.

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 September 30, 2018 were approximately $37.4 million.

The Units were issued pursuant to a prospectus supplement dated April 28, 2017 and an accompanying base prospectus dated June 22, 2016 that form a part of the registration statement on Form S-3 that the Company filed with the SEC on November 7, 2014 and was declared effective on December 19, 2014 (File No. 333-199998), and post-effectively amended pursuant to Post-Effective Amendment No. 1 on Form S-3, as filed with the SEC on March 8, 2016 and declared effective on June 22, 2016 and a related registration statement filed pursuant to Rule 462(b) promulgated under the Securities Act of 1933.

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 9,579,884 shares of common stock underlying the outstanding Series B Warrants.  This registration statement on Form S-3 was declared effective on January 29, 2018.  

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Lincoln Park Purchase Agreement

On December 16, 2016, we entered into a purchase agreement, or the LPC Purchase Agreement, with Lincoln Park Capital Fund, LLC, an Illinois limited liability company, or Lincoln Park, pursuant to which we had 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 Purchase Agreement.  Effective April 27, 2017, we terminated the LPC Purchase Agreement. The LPC Purchase Agreement provided us with an election to terminate the Purchase Agreement for any reason or for no reason by delivering a notice to Lincoln Park, and we did not incur any early termination penalties in connection with the termination of the LPC Purchase Agreement. Prior to termination, we sold shares of our common stock to Lincoln Park under the LPC Purchase Agreement for gross proceeds of approximately $5.7 million.

At-the-Market Offerings

On February 9, 2016, we entered into a Controlled Equity Offering SM Sales Agreement, or the 2016 Sales Agreement, with Cantor Fitzgerald & Co., or Cantor, under which we could offer and sell, through Cantor, up to approximately $43.6 million in shares of common stock in an at-the market offering, or the 2016 ATM Offering. The 2016 Sales Agreement was terminated, effective September 10, 2017. We paid Cantor a commission of approximately 3% of the aggregate gross proceeds received from all sales of common stock under the 2016 Sales Agreement.

On August 31, 2017, we entered into an At-the-Market Equity Offering Sales Agreement, or the 2017 Sales Agreement, with Stifel, Nicolaus & Company, Incorporated, or Stifel, under which we could offer and sell, through Stifel, up to approximately $50.0 million in shares of common stock in an at-the-market offering, or the 2017 ATM Offering. All sales of shares were made pursuant to an effective shelf registration statement on Form S-3 filed with the SEC. We paid Stifel a commission of approximately 3% of the aggregate gross proceeds received from all sales of common stock under the 2017 Sales Agreement. As of October 31, 2017, the 2017 ATM Offering was completed.

The following table summarizes the total sales under the 2016 Sales Agreement and 2017 Sales Agreement for the periods indicated (in thousands, except per share amounts):

	2017 Sales Agreement		2016 Sales Agreement
	Year Ended December 31, 2017		Year Ended December 31, 2016
Total shares of common stock sold		15,998.5		8,763.4
Average price per share	$	3.13	$	4.70
Gross proceeds	$	50,000	$	41,156
Commissions earned by Stifel or Cantor	$	1,500	$	1,235
Other issuance costs	$	97	$	185

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 with Sofar S.p.A., 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 the Seller, 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 S.p.A. 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.

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Under the terms of the Purchase Agreement, the consideration consisted of the issuance of 15,543,413 shares of the Company’s common stock, or the Securities Consideration, and approximately $25,000,000 U.S. Dollars and €27,500,000 Euro in cash consideration, or the Cash Consideration. The Securities Consideration was issued in full at closing of the acquisition; the Cash Consideration was or will be paid in four tranches, with US $25,000,000 paid at closing and the remaining Cash Consideration of €27,500,000 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 exchange for the issuance of 3,722,685 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 $1.404 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. 

The issuance of the initial Securities Consideration was effected as a private placement of securities under Section 4(a)(2) of the Securities Act, and Regulation D promulgated thereunder.  The issuance of the additional shares in January 2017 was made under an existing shelf registration statement on Form S-3.

As of September 30, 2018, the Company has paid all Cash Consideration due under the second tranche.

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

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

Results of Operations

Revenue

Our revenue consisted of product revenue resulting from the sale of Senhance Systems in Europe, Asia and U.S., and related instruments, accessories and services for systems sold in the current and prior periods.

We expect to experience some unevenness in the number and trend, and average selling price, of units sold on a quarterly basis given the early stage of commercialization of our products.

Product and service revenue for the three months ended September 30, 2018 increased to $5.4 million compared to $0.2 million for the three months ended September 30, 2017. The $5.2 million increase was the result of the revenue recognized on the sale of four Senhance Systems.

Product and service revenue for the nine months ended September 30, 2018 increased to $16.6 million compared to $3.7 for the nine months ended September 30, 2017. The $12.9 million increase was primarily the result of the revenue recognized on the sale of ten Senhance Systems.

Cost of Revenue

Cost of revenue consists primarily of costs related to contract manufacturing, materials, and manufacturing overhead. We expense all inventory 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 become less significant 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.

Cost of revenue for the three months ended September 30, 2018 increased to $4.2 million as compared to $0.9 million for the three months ended September 30, 2017. This increase over the prior year period was the result of increased sales and costs for manufacturing overhead and field service.

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Cost of revenue for the nine months ended September 30, 2018 increased to $10.5 million as compared to $3.2 million for the nine months ended September 30, 2017. This increase over the prior year period was the result of increased sales and costs for manufacturing overhead and field service.

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 as we continue to invest in new products and solutions to be offered with the Senhance System. R&D expenses are expensed as incurred.

R&D expenses for the three months ended September 30, 2018 decreased 2% to $4.8 million as compared to $4.9 million for the three months ended September 30, 2017. The $0.1 million decrease resulted primarily from decreased miscellaneous costs of $0.5 million offset by increased personnel related costs of $0.4 million.

R&D expenses for the nine months ended September 30, 2018 decreased 8% to $15.4 million as compared to $16.8 million for the nine months ended September 30, 2017. The $1.4 million decrease resulted primarily from decreased preclinical lab expense of $0.5 million, decreased miscellaneous costs of $0.4 million, decreased depreciation and equipment maintenance of $0.3 million, decreased contract engineering services, consulting and other outside services of $0.2 million, and decreased supplies expense of $0.1 million, offset by increased personnel costs of $0.1 million. The decreases primarily relate to costs incurred in the prior-year period relating to the FDA 510(k) submission of the Senhance System.

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 significantly in support of our Senhance System commercialization.

Sales and marketing expenses for the three months ended September 30, 2018 increased 29% to $5.8 million compared to $4.5 million for the three months ended September 30, 2017. The $1.3 million increase was primarily related to increased personnel related costs of $0.5 million, increased consulting and outside service costs of $0.3 million, increased other costs of $0.3 million and increased demonstration and supplies expense of $0.2 million as we increased our U.S. sales and marketing team following receipt of 510(k) clearance for the Senhance System.

Sales and marketing expenses for the nine months ended September 30, 2018 increased 48% to $17.8 million compared to $12.0 million for the nine months ended September 30, 2017. The $5.8 million increase was primarily related to increased personnel related costs of $3.8 million, increased consulting and outside service costs of $1.1 million, increased other costs of $0.5 million and increased depreciation expense of $0.4 million as we increased our U.S. sales and marketing team following receipt of 510(k) clearance for the Senhance System.

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 increase to support our sales, marketing, and research and development efforts.

General and administrative expenses for the three months ended September 30, 2018 increased 28% to $3.7 million compared to $2.9 million for the three months ended September 30, 2017. The $0.8 million increase was primarily due to increased personnel costs of $0.4 million and increased outsourced services expense of $0.4 million. The increase primarily relates to increased support of sales, marketing, and research and development efforts as we shift to commercialization.

General and administrative expenses for the nine months ended September 30, 2018 increased 15% to $10.0 million compared to $8.7 million for the nine months ended September 30, 2017. The $1.3 million increase was primarily due to increased personnel costs of $0.9 million and increased outsourced services expense of $0.4 million. The increase primarily relates to increased support of sales, marketing, and research and development efforts as we shift to commercialization.

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Gain from Sale of SurgiBot Assets, Net

The gain from the sale of SurgiBot assets, net to GBIL was $11.9 million for the nine months ended September 30, 2018.

Amortization of Intangible Assets

Amortization of intangible assets for the three months ended September 30, 2018 increased to $2.7 million compared to $1.8 million for the three months ended September 30, 2017. The $0.9 million increase was primarily the result of the amortization of in-process research and development transferred to intellectual property in October 2017.

Amortization of intangible assets for the nine months ended September 30, 2018 increased to $8.2 million compared to $5.1 million for the nine months ended September 30, 2017. The $3.1 million increase was primarily the result of the amortization of in-process research and development transferred to intellectual property in October 2017.

Change in Fair Value of Contingent Consideration

The change in fair value of contingent consideration in connection with the Senhance Acquisition was $(1.4) million for the three months ended September 30, 2018 compared to $0.8 million for the three months ended September 30, 2017. The $2.2 million decrease was primarily related to the effect of a change in the estimated discount rate, the change in the passage of time on the fair value measurement, and the impact of foreign currency exchange rates.  

The change in fair value of contingent consideration in connection with the Senhance Acquisition was $0.1 million for the nine months ended September 30, 2018 compared to $1.2 million for the nine months ended September 30, 2017. The $1.1 million decrease was primarily related to the effect of a change in the estimated discount rate, the change in the passage of time on the fair value measurement, and the impact of foreign currency exchange rates.  

Acquisition Related Costs

Acquisition related costs of $0.3 million for the three and nine months ended September 30, 2018, were incurred in connection with the MST Purchase Agreement.

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. In September 2018, the Company determined that the accrual was no longer required and reversed the accrual.

Change in Fair Value of Warrant Liabilities

The change in fair value of Series A Warrants and Series B Warrants issued in April 2017 was $8.8 million for the three months ended September 30, 2018 compared to $22.9 million for the three months ended September 30, 2017. The $14.1 million decrease for the three months ended September 30, 2018 includes remeasurement associated with the warrants exercised during the quarter ended September 30, 2018 and the outstanding warrants at September 30, 2018. The remeasurement related to the warrants exercised was primarily the result of the difference in the stock price at the date of exercise and June 30, 2018. The expense related to the warrants outstanding at September 30, 2018 was primarily the result of the difference between the stock price at September 30, 2018 and at June 30, 2018.

The change in fair value of Series A Warrants and Series B Warrants issued in April 2017 was $24.4 million for the nine months ended September 30, 2018 compared to $25.2 million for the nine months ended September 30, 2017. The $0.8 million decrease for the nine months ended September 30, 2018 includes remeasurement associated with the warrants exercised during the nine months ended September 30, 2018 and the outstanding warrants at September 30, 2018. The remeasurement related to the warrants exercised was primarily the result of the difference in the stock price at the date of exercise and December 31, 2017. The expense related to the warrants outstanding at September 30, 2018 was primarily the result of the difference between the stock price at September 30, 2018 and at December 31, 2017.

Interest Income

Interest income for the three months ended September 30, 2018 increased to $0.4 million compared to $0.1 million for the three months ended September 30, 2017. The $0.3 million increase was primarily related to the increase in funds available for investment, and the related interest rates on short term investments.

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Interest income for the nine months ended September 30, 2018 increased to $1.0 million compared to $0.1 million for the nine months ended September 30, 2017. The $0.9 million increase was primarily related to the increase in funds available for investment, and the related interest rates on short term investments.

Interest Expense

Interest expense for the three months ended September 30, 2018 increased to $0.7 million compared to $0.6 million for the three months ended September 30, 2017. The $0.1 million increase was primarily related to the increased notes payable.

Interest expense for the nine months ended September 30, 2018 increased to $3.4 million compared to $1.6 million for the nine months ended September 30, 2017. The $1.8 million increase was primarily related to the $1.4 million loss on extinguishment of debt and the increase in notes payable.

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 TransEnterix Italia as a result of the acquisition of the Senhance System. We recognized $0.8 million and $0.7 million of income tax benefit for the three months ended September 30, 2018 and 2017, respectively. We recognized $2.6 million and $2.3 million of income tax benefit for the nine months ended September 30, 2018 and 2017, respectively.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception we have incurred significant losses and, as of September 30, 2018, we had an accumulated deficit of $503.0 million. We have not yet achieved profitability and we cannot assure investors that we will achieve profitability with our existing capital resources. As of September 30, 2018, the Company's cash and restricted cash balance and short-term investments were approximately $82.1 million. We believe that our existing cash and cash equivalents and short-term investments, together with cash received from sales of our products, will be sufficient to fund operations through at least the next 12 months. We expect to continue to fund sales and marketing, research and development and general and administrative expenses at similar to current or higher levels and, as a result, we will need to generate significant revenues to achieve profitability. 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 and the sale of equity securities held as investments.

We currently have one effective shelf registration statement on file with the SEC, which registers up to $150.0 million of debt securities, common stock, preferred stock, or warrants, or any combination thereof for future financing transactions.  The shelf registration statement was declared effective by the SEC on May 19, 2017. We have raised $50.0 million in gross proceeds and approximately $48.5 million in net proceeds under such shelf registration statement through the sale of all the shares available under the 2017 ATM Offering. As of September 30, 2018, we had $100.0 million available for future financings under such shelf registration statement.  

Consolidated Cash Flow Data

	Nine Months Ended
	September 30,
	2018			2017
(in millions)
Net cash (used in) provided by
Operating activities	$	(35.6	)	$	(37.5	)
Investing activities		(35.6	)		(1.9	)
Financing activities		16.1			36.0
Effect of exchange rate changes on cash and    cash equivalents		(0.1	)		(0.3	)
Net decrease in cash, cash    equivalents and restricted cash	$	(55.2	)	$	(3.7	)

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Operating Activities

For the nine months ended September 30, 2018, cash used in operating activities of $35.6 million consisted of a net loss of $55.3 million and cash used for working capital of $6.1 million, offset by non-cash items of $25.8 million. The non-cash items primarily consisted of $24.4 million change in fair value of warrant liabilities, $8.8 million of amortization, $6.7 million of stock-based compensation expense, $1.9 million of depreciation, $1.4 million loss on debt extinguishment, and $0.1 million change in fair value of contingent consideration, offset by $11.9 million gain from sale of SurgiBot assets, $3.0 million recovery of transfer fee and $2.6 million deferred income tax benefit. The decrease in cash from changes in working capital included $1.3 million increase in inventories, $4.3 million increase in accounts receivable and $0.9 million decrease in accounts payable, offset by $0.4 million increase in deferred revenue.

Investing Activities

For the nine months ended September 30, 2018, net cash used in investing activities was $35.6 million. This amount primarily consists of $39.6 million purchase of short-term investments and $0.5 million purchases of property and equipment, offset by $4.5 million proceeds related to the sale of the SurgiBot assets.

Financing Activities

For the nine months ended September 30, 2018, net cash provided by financing activities was $16.1 million. This amount was primarily related to $18.8 million in proceeds from the issuance of debt, which was partially offset by $15.3 million in payment of debt, $11.4 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 $1.6 million related to the taxes withheld on RSU awards and $0.4 million payment of contingent consideration.

Operating Capital and Capital Expenditure Requirements

We believe that our existing cash and cash equivalents and short-term investments, together with cash received from sales of our products, will be sufficient to meet our anticipated cash needs through at least the next 12 months. 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, the enhancement and protection of our intellectual property, on notes payable payments as they come due, and on contingent consideration payments in connection with the acquisition of the Senhance System. We will need to obtain additional financing to pursue our business strategy, to respond to new competitive pressures or to take advantage of opportunities that may arise. To meet our capital needs, we are considering multiple alternatives, including, but not limited to, additional equity financings, debt financings, strategic collaborations and other funding transactions. 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.

Cash and cash equivalents held by our foreign subsidiaries totaled $3.3 million at September 30, 2018, 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 U.S., we believe that the potential U.S. tax impact to repatriate these funds would be immaterial.

Hercules Loan Agreement

On May 23, 2018, the Company and its domestic subsidiaries, as co-borrowers, entered into a Loan and Security Agreement with several banks and other financial institutions or entities from time to time party to the Loan Agreement and Hercules Capital, Inc., as administrative agent and collateral agent. Please see the description of the Hercules Loan Agreement above in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations ‑ Debt Refinancing.” 

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 nine months ended September 30, 2018.

33

Off-Balance Sheet Arrangements

As of September 30, 2018, the Company 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 financial statements and notes thereto appearing in this Form 10-Q and in the Fiscal 2017 Form 10-K. The preparation of these 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, contingent consideration, warrant liabilities, stock-based compensation, inventory, and revenue recognition. 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 Financial Statements in this Form 10-Q. Actual results may differ from these estimates under different assumptions and conditions.

While all accounting policies impact the 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, contingent consideration, warrants liabilities, stock-based compensation, inventory and revenue recognition.

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 acquisition 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 test. 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 it’s carrying amount, including goodwill.

As of December 31, 2017, we elected to bypass the qualitative assessment and calculated the fair value of our reporting unit, which exceeded the carrying amount. Accordingly, no charge for goodwill impairment was required as of December 31, 2017.

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.

Contingent Consideration

Contingent consideration is recorded as a liability and measured at fair value using a discounted cash flow model utilizing significant unobservable inputs including the probability of achieving each of the potential milestones 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 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 statements of operations and comprehensive loss.

34

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.    

Stock-Based Compensation

We recognize as expense, the grant-date fair value of stock options and other stock 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.

Inventory

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.

Revenue Recognition

Our revenue consists of product revenue resulting from the sale of systems, system components, instruments and accessories, and service revenue. We account 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. Our 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 sale arrangements generally contain multiple products and services. For these bundled sale arrangements, we account 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 bundled package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. Our system sale arrangements 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 the arrangements that are legally enforceable to be performance obligations. Other than service, we generally satisfy all of the performance obligations up-front. System components, system accessories, instruments, accessories, and service are also sold on a standalone basis.

We recognize revenues as the performance obligations are satisfied by transferring control of the product or service to a customer. We generally recognize revenue for the performance obligations at the following points in time:

• System sales. For systems and system components sold directly to end customers, revenue is recognized when we transfer 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 systems sold through distributors, with the distributors responsible for installation, revenue is recognized generally at the time of shipment. Our system arrangements generally do not provide a right of return. The systems are generally covered by a one-year warranty. Warranty costs were not material for the periods presented.

35

• Instruments and accessories. Revenue from sales of instruments and accessories is recognized when control is transferred to the customers, which generally occur at the time of shipment, but also occur 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 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 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 functionality of the products and services, geographies, type of customer, 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 recognized as revenue in future periods.

We invoice our customers based on the billing schedules in our 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.

Recent Accounting Pronouncements

See “Note 2. Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in the Company’s Fiscal 2017 Form 10-K, as well as the notes to the consolidated financial statements above in this Form 10-Q, for a full description of recent accounting pronouncements including the respective expected dates of adoption and effects on Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

We have limited exposure to market risks from instruments that may impact the Balance Sheets, Statements of Operations and Comprehensive Loss, and Statements of Cash Flows. Such exposure is due primarily to changing interest rates and foreign currency exchange rates.

Interest Rates

The primary objective for our investment activities is to preserve principal while maximizing yields without significantly increasing risk. This is accomplished by investing excess cash in money market funds and Treasury securities. As of September 30, 2018, approximately 100% of the investment portfolio was in cash equivalents with very short term maturities and therefore not subject to any significant interest rate fluctuations.

36

Foreign Currency Exchange Rate Risk

We conduct operations in several different countries, including the U.S. and throughout Europe and Asia, and portions of our revenues, expenses, assets and liabilities are denominated in U.S. dollars, Euros or other currencies. Since our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. We have not historically hedged our exposure to foreign currency fluctuations.  Accordingly, increases or decreases in the value of the U.S. dollar against the Euro and other currencies could materially affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign currencies.

During the nine months ended September 30, 2018, 83% of our revenue and approximately 39% of our operating expenses, excluding the offsetting impact of the gain from sale of SurgiBot assets, were denominated in currencies other than the U.S. dollar, most notably the Euro. Based on actual results over the past year, a hypothetical 10% increase or decrease in the U.S. dollar against the Euro would have increased or decreased revenue by approximately $1.4 million and operating expenses by approximately $2.1 million.

ITEM 4. 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 September 30, 2018. 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 September 30, 2018, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Controls Over Financial Reporting

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

37

PART II. OTHER INFORMATION

Item 1 Legal Proceedings

None.

Item 1A Risk Factors.

Reference is made to the Risk Factors included in our Fiscal 2017 Form 10-K.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds.

The following table summarizes the Company’s purchases of its common stock for the quarter ended September 30, 2018:

	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 (1)	per Share		Programs	Programs
July 1 - 31, 2018	360,371	$	3.84	—	—
August 1 - 31, 2018	—		—	—	—
September 1 - 30, 2018	—		—	—	—
Total	360,371	$	3.84	—	—

(1) These amounts consist of 360,371 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.  We purchased these shares at their fair market value, as determined by reference to the closing price of our common stock on the day prior to the vesting date.     

Item 3 Defaults Upon Senior Securities.

None.

Item 4 Mine Safety Disclosures.

Not applicable.

Item 5 Other Information

None.

38

ITEM 6. EXHIBITS  

Exhibit No.	Description
2.1	Asset Purchase Agreement, dated September 23, 2018, by and among MST Medical Surgery Technologies Ltd., TransEnterix, Inc., TransEnterix Europe, S.A.R.L., a Luxemburg limited liability company acting through its Swiss branch being established under the name “TransEnterix Europe Sarl, Bertrange, Swiss Branch Lugano,” and TransEnterix Israel Ltd. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 25, 2018).
10.1	Lock-Up Agreement, dated October 31, 2018, by and between TransEnterix, Inc. and MST Medical Surgery Technologies Ltd. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2018).
10.2	Registration Rights Agreement, dated October 31, 2018, by and between TransEnterix, Inc. and MST Medical Surgery Technologies Ltd. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 1, 2018).
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 *	XBRL Instance Document.
101.SCH *	XBRL Taxonomy Extension Schema Document.
101.CAL *	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE *	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith

39

SIGNATURES

Pursuant to the requirements 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.

	TransEnterix, Inc.
Date: November 8, 2018	By:	/s/ Todd M. Pope
	Todd M. Pope
	President and Chief Executive Officer
Date: November 8, 2018	By:	/s/ Joseph P. Slattery
	Joseph P. Slattery
	Executive Vice President and Chief Financial Officer

40

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A)/15D-14(A)

I, Todd M. Pope, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TransEnterix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2018

/s/ Todd M. Pope 

Todd M. Pope

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13A-14(A)/15D-14(A)

I, Joseph P. Slattery, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TransEnterix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2018

/s/ Joseph P. Slattery 

Joseph P. Slattery

Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Todd M. Pope, hereby certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and 18 U.S.C. Section 1350, that the Quarterly Report on Form 10-Q of TransEnterix, Inc. (the “Company”) for the quarterly period ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2018	By:	/s/ Todd M. Pope
		Todd M. Pope
		President and Chief Executive Officer

This certification accompanies the Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph P. Slattery, hereby certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and 18 U.S.C. Section 1350, that the Quarterly Report on Form 10-Q of TransEnterix, Inc. (the “Company”) for the quarterly period ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2018	By:	/s/ Joseph P. Slattery
		Joseph P. Slattery
		Executive Vice President and Chief Financial Officer

This certification accompanies the Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 02, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Trading Symbol	TRXC
Entity Registrant Name	TRANSENTERIX INC.
Entity Central Index Key	0000876378
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		216,119,434

XML

Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Revenue	$ 5,422	$ 183	$ 16,578	$ 3,713
Cost of revenue	4,249	921	10,536	3,227
Gross profit (loss)	1,173	(738)	6,042	486
Operating Expenses (Income)
Research and development	4,838	4,889	15,384	16,814
Sales and marketing	5,819	4,528	17,835	12,000
General and administrative	3,686	2,920	9,989	8,688
Amortization of intangible assets	2,674	1,821	8,244	5,144
Change in fair value of contingent consideration	(1,358)	773	81	1,226
Issuance costs for warrants				627
Acquisition related costs	345		345
Gain from sale of SurgiBot assets, net	44		(11,915)
Reversal of transfer fee accrual	(2,994)		(2,994)
Total Operating Expenses (Income)	13,054	14,931	36,969	44,499
Operating Loss	(11,881)	(15,669)	(30,927)	(44,013)
Other (Expense) Income
Change in fair value of warrant liabilities	(8,760)	(22,887)	(24,438)	(25,213)
Interest income	391	62	982	124
Interest expense	(685)	(563)	(3,398)	(1,581)
Other expense	(52)	(194)	(109)	(294)
Total Other (Expense) Income, net	(9,106)	(23,582)	(26,963)	(26,964)
Loss before income taxes	(20,987)	(39,251)	(57,890)	(70,977)
Income tax benefit	781	738	2,554	2,337
Net loss	(20,206)	(38,513)	(55,336)	(68,640)
Other comprehensive loss
Foreign currency translation (loss) gain	(561)	2,952	(2,651)	9,515
Comprehensive loss	$ (20,767)	$ (35,561)	$ (57,987)	$ (59,125)
Net loss per share - basic and diluted	$ (0.10)	$ (0.26)	$ (0.27)	$ (0.51)
Weighted average common shares outstanding - basic and diluted	209,088	149,516	204,531	134,622

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Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current Assets
Cash and cash equivalents	$ 41,748	$ 91,217
Short-term investments	39,670
Accounts receivable, net	5,669	1,536
Inventories	10,242	10,817
Interest receivable	51	80
Other current assets	9,039	9,344
Total Current Assets	106,419	112,994
Restricted cash	663	6,389
Property and equipment, net	6,659	6,670
Goodwill	70,669	71,368
Other long term assets	224	192
Total Assets	227,559	250,251
Current Liabilities
Accounts payable	2,785	3,771
Accrued expenses	7,432	10,974
Deferred revenue - current portion	1,270	1,088
Deferred gain from sale of SurgiBot assets		7,500
Contingent consideration – current portion	555	719
Notes payable - current portion, net of debt discount		4,788
Total Current Liabilities	12,042	28,840
Long Term Liabilities
Deferred revenue - less current portion	131
Contingent consideration – less current portion	11,549	11,699
Notes payable - less current portion, net of debt discount	19,106	8,385
Warrant liabilities	15,044	14,090
Net deferred tax liabilities	5,624	8,389
Total Liabilities	63,496	71,403
Commitments and Contingencies (Note 18)
Stockholders’ Equity
Common stock $0.001 par value, 750,000,000 shares authorized at September 30, 2018 and December 31, 2017; 212,631,801 and 199,282,003 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	212	199
Additional paid-in capital	664,439	621,261
Accumulated deficit	(502,965)	(447,640)
Accumulated other comprehensive income	2,377	5,028
Total Stockholders’ Equity	164,063	178,848
Total Liabilities and Stockholders’ Equity	227,559	250,251
Intellectual Property, Net [Member]
Current Assets
Intangible assets	$ 42,925	$ 52,638

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
Statement Of Partners Capital [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	212,631,801	199,282,003
Common stock, shares outstanding	212,631,801	199,282,003

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Consolidated Statements of Shareholders' Equity - 9 months ended Sep. 30, 2018 - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income [Member]
Balance at Dec. 31, 2017	$ 178,848	$ 199		$ 621,261	$ (447,640)	$ 5,028
Balance, Shares at Dec. 31, 2017		199,282
Stock-based compensation	6,694			6,694
Issuance of common stock and warrants, net of issuance costs	279			279
Exercise of stock options and warrants	34,880	$ 11		34,869
Exercise of stock options and warrants, Shares		11,028
Award of restricted stock units	1	$ 1
Award of restricted stock units, Shares		1,036
Return of common stock to pay withholding taxes on restricted stock	(1,664)		$ (1)	(1,663)
Return of common stock to pay withholding taxes on restricted stock, Shares			(537)
Cancellation of treasury stock	1		$ 1
Cancellation of treasury stock, Shares			537
Issuance of common stock related to sale of SurgiBot assets	3,000	$ 1		2,999
Issuance of common stock related to sale of SurgiBot assets, Shares		1,286
Cumulative effect of change in accounting principle (Note 2)	11				11
Other comprehensive loss	(2,651)					(2,651)
Net loss	(55,336)				(55,336)
Balance at Sep. 30, 2018	$ 164,063	$ 212		$ 664,439	$ (502,965)	$ 2,377
Balance, Shares at Sep. 30, 2018		212,632

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Operating Activities
Net loss	$ (55,336)	$ (68,640)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Gain from sale of SurgiBot assets, net	(11,915)
Depreciation	1,876	1,816
Amortization of intangible assets	8,244	5,144
Amortization of debt discount and debt issuance costs	575	212
Amortization of held to maturity investment discount	(51)
Stock-based compensation	6,694	5,321
Non-employee warrant awards		571
Deferred tax benefit	(2,572)	(2,320)
Loss on extinguishment of debt	1,400	308
Change in fair value of warrant liabilities	24,438	25,213
Change in fair value of contingent consideration	81	1,226
Recovery of transfer fee	(2,994)
Changes in operating assets and liabilities:
Accounts receivable	(4,262)	886
Interest receivable	28	79
Inventories	(1,276)	(3,519)
Other current and long term assets	27	(2,454)
Accounts payable	(903)	(1,599)
Accrued expenses	(56)	207
Deferred revenue	361
Net cash and cash equivalents used in operating activities	(35,641)	(37,549)
Investing Activities
Purchase of short-term investments	(39,619)
Proceeds related to sale of SurgiBot assets, net	4,496
Purchase of property and equipment	(490)	(1,488)
Purchase of intellectual property		(418)
Proceeds from sale of property and equipment	32
Net cash and cash equivalents used in investing activities	(35,581)	(1,906)
Financing Activities
Payment of notes payable	(15,305)	(13,343)
Proceeds from issuance of debt and warrants, net of issuance costs	18,828	12,956
Payment of contingent consideration	(395)	(395)
Proceeds from issuance of common stock and warrants, net of issuance costs	279	31,546
Taxes paid related to net share settlement of vesting of restricted stock units	(1,662)	(168)
Proceeds from issuance of common stock related to sale of SurgiBot assets	3,000
Proceeds from exercise of stock options and warrants	11,396	5,449
Net cash and cash equivalents provided by financing activities	16,141	36,045
Effect of exchange rate changes on cash and cash equivalents	(114)	(311)
Net decrease in cash, cash equivalents and restricted cash	(55,195)	(3,721)
Cash, cash equivalents and restricted cash, beginning of period	97,606	34,590
Cash, cash equivalents and restricted cash, end of period	42,411	30,869
Supplemental Disclosure for Cash Flow Information
Interest paid	1,135	597
Supplemental Schedule of Noncash Investing and Financing Activities
Transfer of inventories to property and equipment	2,160
Transfer of property and equipment to inventories	648
Issuance of common stock as contingent consideration		5,227
Relative fair value of warrants issued with debt		300
Reclass of warrant liability to common stock and additional paid-in capital	23,485	$ 2,289
Cashless exercise of warrants	$ 4,272

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Organization and Capitalization

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Organization and Capitalization

1. Organization and Capitalization

TransEnterix, Inc. (the “Company”) is a medical device company that is digitizing the interface between the surgeon and the patient to improve minimally invasive surgery by addressing the clinical and economic challenges associated with current laparoscopic and robotic options in today's value-based healthcare environment. The Company is focused on the commercialization of the Senhance™ Surgical System (the “Senhance System”), which digitizes laparoscopic minimally invasive surgery. The Senhance System allows for robotic precision, haptic feedback, surgeon camera control via eye sensing and improved ergonomics while offering responsible economics.

The Senhance System has been granted a CE Mark in Europe for laparoscopic abdominal and pelvic surgery, as well as limited thoracic operations excluding cardiac and vascular surgery. In April 2017, the Company submitted a 510(k) application to the FDA for the Senhance System. On October 13, 2017, the Company received 510(k) clearance from the FDA for use in laparoscopic colorectal and gynecologic surgery. In May 2018, the Company received 510(k) clearance from the FDA expanding the indications for use inlaparoscopic inguinal hernia and laparoscopic cholecystectomy (gallbladder removal) surgery. The Senhance System is available for sale in the U.S., the EU and select other countries.

The Senhance System is a multi-port robotic surgery system which 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. The system replicates laparoscopic motion that is familiar to experienced surgeons, and integrates three-dimensional high definition vision technology. The Senhance System also offers responsible economics to hospitals by offering robotic technology with reusable instruments thereby reducing additional costs per surgery when compared to other robotic solutions.

The Company also developed the SurgiBot™ System, a single-port, robotically enhanced laparoscopic surgical platform. On December 18, 2017, the Company announced that it had entered into an agreement with Great Belief International Limited (“GBIL”) to advance the SurgiBot System towards global commercialization.  The agreement transfers ownership of the SurgiBot System assets, while the Company retains 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 (“CFDA”), while entering into a nationwide distribution agreement with China National Scientific and Instruments and Materials Company (“CSIMC”) for the Chinese market.  The agreement provides the Company with proceeds of at least $29 million, of which $7.5 million was received in December 2017. An additional $7.5 million was received at the second closing in March 2018, which included a $3.0 million equity investment at $2.33 per share of common stock. The remaining $14.0 million, representing minimum royalties, will be paid beginning at the earlier of receipt of Chinese regulatory approval or five years after the second closing date.

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 which 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 International, Inc.; TransEnterix Italia S.r.l.; TransEnterix Asia Pte. Ltd.; TransEnterix Taiwan Ltd.; TransEnterix Japan KK and TransEnterix Israel Ltd.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements 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. The results reported in these 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 financial statements and the notes thereto included in the Fiscal 2017 Form 10-K. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) have been condensed or omitted in the accompanying interim consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The accompanying Consolidated Financial Statements 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.Á.R.L; TransEnterix Asia Pte. Ltd.; TransEnterix Taiwan Ltd.; TransEnterix Japan KK and TransEnterix Israel Ltd. All inter-company accounts and transactions have been eliminated in consolidation.

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 identifiable intangible assets and goodwill, contingent consideration, warrant liabilities, stock compensation expense, revenue recognition, restructuring and other charges, excess and obsolete inventory reserves, and deferred tax asset valuation allowances.

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 at September 30, 2018 includes $663,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit cards and automobile leases. Restricted cash at December 31, 2017 includes $6.0 million in a money market account, held in connection with the Company’s notes payable and $389,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit card agreement and automobile leases.

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 September 30, 2018, short-term investments consisted of $39.7 million in U.S. government securities, all of which mature in less than a year. There were no investments as of December 31, 2017.

The Company reassesses the appropriateness of the classification of its investments at the end of each reporting period. The Company has determined that its debt securities should be classified as held-to-maturity as of September 30, 2018. This classification was based upon management’s determination that it has the positive intent and ability to hold the securities until their maturity dates, as the investments mature within 6 months and the underlying cash invested in these securities is not required for current operations. Due to the short-term maturities of these instruments, the amortized cost approximates the related fair values, which are based on level inputs as defined in Note 5. As of September 30, 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. No such impairment was recorded as of September 30, 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 cash deposits may at times exceed the FDIC 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 net revenue 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 but has not experienced significant losses to date. The Company had four customers who accounted for 88% of the Company’s net accounts receivable at September 30, 2018 and one customer who constituted 88% of the Company’s net accounts receivable at December 31, 2017. The Company had five customers who accounted for 68% of the Company’s net revenue for the nine months ended September 30, 2018 and two customers who constituted 89% of the Company’s net revenue for the nine months ended September 30, 2017. The Company had four customers who accounted for 96% of the Company’s net revenue for the three months ended September 30, 2018 and five customers who constituted 100% of the Company’s net revenue for the three months ended September 30, 2017.

Accounts Receivable

Accounts receivable are recorded at net realizable value, which includes an allowance for estimated uncollectable accounts. The allowance for uncollectible accounts was determined based on historical collection experience.

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.

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. This method approximates the period over which the Company expects to receive the benefit from these assets.  No impairment existed at September 30, 2018 or December 31, 2017.

Indefinite-lived intangible assets, such as goodwill, are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis at December 31 or when events or changes in circumstances indicate evidence a potential impairment exists, using a fair value based test. The Company continues to operate in one segment, which is considered to be the sole reporting unit and therefore, goodwill is tested for impairment at the enterprise level. No impairment existed at September 30, 2018 or December 31, 2017.

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 was acquired on September 21, 2015.

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 amortized based on their estimated useful lives.

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	Lesserof 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 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 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 contingent consideration is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss.

Deferred Gain from Sale of SurgiBot Assets

In conjunction with the agreement with GBIL in relation to the transfer of the SurgiBot System assets, the Company received $7.5 million in December 2017.  This amount was included in deferred gain from sale of SurgiBot assets in the consolidated balance sheet pending transfer of the assets in March 2018 and was recognized in gain from sale of SurgiBot assets in the consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2018.

Warrant Liabilities

The Company’s Series B Warrants 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

The functional currency of the Company’s operational foreign subsidiaries is Euros. 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.

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 statement 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 nine months ended September 30, 2018 and 2017 were not significant.

Risk and Uncertainties

The Company is subject to a number of risks similar to other similarly-sized companies in the medical device industry. These risks include, without limitation, the historical lack of profitability; the Company’s ability to raise additional capital; 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, Italy, other countries in the European Union, and other countries in which the Company intends to operate; its ability to attract and retain key management, marketing and scientific personnel; competition from new entrants; 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.

Revenue Recognition

The Company adopted ASC Topic 606, Revenue from Contracts with Customers, on January 1, 2018. The Company’s revenue consists of product revenue resulting from the sale of systems, 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 system sale arrangements generally contain multiple products and services. For these bundled 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 bundled 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 system sale arrangements include a combination of the following performance obligations: system(s), system components, instruments, accessories, and system service. The Company’s 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. The Company considers the service terms in the arrangements that are legally enforceable to be performance obligations. Other than service, the Company generally satisfies all of the performance obligations up-front. System components, system accessories, instruments, accessories, and service are also sold on a standalone basis.

The Company recognizes revenues 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 systems and system components sold directly to end customers, 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 systems sold through distributors, for which distributors are responsible for installation, revenue is recognized generally at the time of shipment. The Company’s system arrangements generally do not provide a right of return. The 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 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 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 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 types and geography:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
	(in thousands)				(in thousands)
	(unaudited)				(unaudited)
U.S.
Systems	$	868	$	—	$	1,742	$	—
Instruments and accessories		426		—		835		—
Services		87		—		137		—
Total U.S. revenue		1,381		—		2,714		—
Outside of U.S. ("OUS")
Systems		3,450		—		10,686		2,609
Instruments and accessories		441		10		2,653		683
Services		150		173		525		421
Total OUS revenue		4,041		183		13,864		3,713
Total
Systems		4,318		—		12,428		2,609
Instruments and accessories		867		10		3,488		683
Services		237		173		662		421
Total revenue	$	5,422	$	183	$	16,578	$	3,713

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

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 $4.4 million as of September 30, 2018.

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. Contract assets are included in accounts receivable and totaled $0.1 million and $0 as of September 30, 2018 and 2017, 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 for the nine months ended September 30, 2018 and 2017, that was included in the deferred revenue balance at the beginning of each reporting period was $0.3 million and $0.2 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.

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.

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.

Stock-Based Compensation

The Company follows ASC 718 “Stock Compensation” and ASC 505-50 “Equity-Based Payments to Non-employees”, which provide guidance in accounting for share-based awards exchanged for services rendered and requires companies to expense the estimated fair value of these awards over the requisite service period. For awards granted to non-employees, the Company determines the fair value of the stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

The Company recognizes compensation expense for stock-based awards based on estimated fair values on the date of grant for awards granted to employees. The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock options. 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 $6,694,000 and $5,321,000 for the nine months ended September 30, 2018 and 2017, respectively.

The TransEnterix, Inc. 2007 Incentive Compensation Plan (the “Plan”) was originally approved by the Company’s board of directors, (the “Board”) and adopted by the majority of the Company’s stockholders on November 13, 2007. The Plan has been subsequently amended, and approved by stockholders, as required, to increase the number of shares available under the Plan and to make other changes.  As of May 24, 2018, the date of the Company’s annual meeting of stockholders for 2018, the number of shares of common stock, par value $0.001 per share (the “Common Stock”), authorized under the Plan is 40,940,000.

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, 2017. As a result of the newly enacted tax rate, the Company adjusted its 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, 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 estimates that the deemed repatriation will not result in any additional U.S. income tax liability as it estimates it currently has no undistributed foreign earnings.

In accordance with Staff Accounting Bulletin (“SAB”) No. 118, income tax effects of the Tax Legislation may be refined upon obtaining, preparing, or analyzing additional information during a measurement period of one year.  During the measurement period provisional amounts may be adjusted for the effects, if any, of interpretive guidance issued after December 31, 2017, by U.S. regulatory and standard-setting bodies.

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 one 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 60% of the Company’s total consolidated assets are located within the U.S. as of September 30, 2018 and December 31, 2017. The remaining assets are mostly located in Europe and are primarily related to the Company’s facility in Italy, and include goodwill, intellectual property, other current assets, property and equipment, cash, accounts receivable and inventory of $91.8 million and $99.9 million at September 30, 2018 and December 31, 2017, respectively. Total assets outside of the U.S. excluding goodwill amounted to 31% of total consolidated assets at September 30, 2018 and December 31, 2017. The Company recognizes sales by geographic area based on the country in which the customer is based. For the nine months ended September 30, 2018, 16% of net revenue was generated in the U.S. and 83% was generated in Europe. For the nine months ended September 30, 2017, 62% of net revenue was generated in Europe and 38% in Asia.    

Impact of Recently Issued Accounting Standards  

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing this ASU and has not yet determined the impact ASU 2018-13 may have on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company is currently assessing this ASU and has not yet determined the impact ASU 2018-07 may have on its consolidated financial statements.

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 feature 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 should not have a material impact on the consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) which addresses changes to reduce the presentation diversity of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees.  The guidance became effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period. The new standard will be applied retrospectively, but may be applied prospectively if retrospective application would be impracticable. The adoption of this ASU did not have an impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. The new standard 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 all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In July 2018, the FASB issued ASU 2018-10, which provides narrow-scope improvements to the lease standard. We expect to elect the ‘package of practical expedients’, which permits us to forgo reassessment of our prior conclusions about lease identification, lease classification and initial direct costs for leases entered into prior to the effective date. Additionally, we expect to elect the practical expedient to not provide comparative reporting periods; therefore, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We do not expect to elect the ‘use-of-hindsight practical expedient’ or the land easement transition relief, the latter of which is not applicable to our industry. Upon adoption, operating leases will be reported on the statement of financial position as gross-up assets and liabilities. The Company has begun evaluating and planning for adoption and implementation of this ASU, including reviewing all material leases, the ASU practical expedient guidelines and current accounting policy elections, and assessing the overall financial statement impact. We expect this ASU will have a material impact on the Company’s financial position. The impact on the Company’s results of operations is currently being evaluated. The impact of this ASU is non-cash in nature and is not expected to affect the Company’s cash flows.

In February 2017, the FASB issued ASU No. 2017-05, Other Income — Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) — Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The new standard clarifies the scope of guidance applicable to sales of nonfinancial assets and also provides guidance on accounting for partial sales of such assets.  The adoption of this ASU did not have an impact on the consolidated financial statements.

The Company adopted the New Revenue Standard in the first quarter of fiscal year 2018 using the modified retrospective method resulting in a cumulative catch-up adjustment to opening retained earnings.  The Company applied the New Revenue Standard to all contracts and concluded that the timing and measurement of revenue recognition is materially consistent under the New Revenue Standard, except for the future billings related to future service included in its multi-year contracts that should be part of the consideration allocated to all performance obligations under the New Revenue Standard. Under the prior standard, future service billings were considered to be contingent revenue, and therefore, were not included in the consideration allocated. Accordingly, the amount of consideration allocated to the performance obligations identified in the Company’s system arrangements is different under the New Revenue Standard than the amount allocated under the prior standard. In general, this will result in an acceleration of the amount of revenue recognized for system sales with multi-year service contracts. Due to limited sales to date, the Company recorded a $11,000 cumulative catch-up adjustment to retained earnings in the first quarter of fiscal year 2018, offset by reductions in accounts receivable of $4,000 and deferred revenue of $15,000. Under the prior standard, revenue would have been $15,000 greater for the nine months ended September 30, 2018 than under the New Revenue Standard.

Reclassifications

Certain prior year amounts within the consolidated statement of operations and comprehensive loss have been reclassified.  Such reclassifications have no effect on previously recorded net loss.

Classification of Certain Items Within the Company’s Form 10-K

Certain reclassifications of prior period amounts will be made within the Company’s Form 10-K filing for the year ended December 31, 2018 to conform to current period presentation. Specifically, during the nine months ended September 30, 2018, the Company determined that the amount related to the deferred gain on sale of SurgiBot assets as reflected within one line in the operating activities section of the consolidated statement of cash flows for the year ended December 31, 2017 should have been classified as cash flows provided from investing activities.  There is no impact to the consolidated statements of operations or consolidated balance sheets. The Company evaluated the effect of this misclassification and concluded it was not material to any of its previously issued consolidated financial statements. Upon revision, cash flows from operating activities for the year ended December 31, 2017, will decrease by $7.5 million to cash and cash equivalents used in operating activities of $47.3 million and cash flows from investing activities will increase by $7.5 million to cash and cash equivalents provided by investing activities of $5.5 million.  There is no impact of the reclassification to the nine months ended September 30, 2017.

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Acquisition of Senhance Surgical Robotic System

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Acquisition of Senhance Surgical Robotic System

3. Acquisition of 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 and changed the name of the acquired company from Vulcanos S.r.l. to TransEnterix Italia S.r.l.

Under the terms of the Purchase Agreement, the consideration consisted of the issuance of 15,543,413 shares of the Company’s common stock (the “Securities Consideration”) and approximately $25.0 million U.S. Dollars and €27.5 million Euro in cash consideration (the “Cash Consideration”). The Securities Consideration was issued in full at the closing of the Senhance Acquisition; the Cash Consideration was or will be paid in four tranches, as follows:

(1) $25.0 million of the Cash Consideration, which was paid at closing.

(2) 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”). Under the Amendment, the Second Tranche was restructured to be paid through the (A) the issuance of 3,722,685 shares of the Company’s common stock with an aggregate fair market value of €5.0 million and (B) the payment of €5.0 million in cash upon the occurrence of either (i) receipt of clearance from the FDA for the Senhance System; or (ii) the Company having cash on hand of at least $50.0 million, or (iii) successfully completing a financing, raising at least $50.0 million in gross proceeds after September 2015, exclusive of any financing proceeds related to the December 2016 purchase agreement between the Company and Lincoln Park Capital Fund, LLC; with payment of simple interest at a rate of 9.0% per annum beginning on December 31, 2016. The Five Million Euro (€5,000,000) cash payment began to accrue simple interest at a rate of 9% per annum beginning on December 31, 2016 and continued to accrue interest until November 15, 2017 when it was paid in full.

(3) The third tranche of the Cash Consideration (the “Third Tranche”) of €15.0 million 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.

(4) 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, 2016. As of September 30, 2018, the Company had paid €2.1 million of the fourth tranche.

The Third Tranche payments will be accelerated in the event that (i) the Company or TransEnterix 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 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.

The Senhance Acquisition was accounted for as a business combination utilizing the methodology prescribed in ASC 805. The purchase price for the Senhance Acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values.

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Cash, Cash Equivalents, and Restricted Cash

9 Months Ended

Sep. 30, 2018

Cash Cash Equivalents Restricted Cash And Restricted Cash Equivalents [Abstract]

Cash, Cash Equivalents, and Restricted Cash

4. Cash, Cash Equivalents, and Restricted Cash

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

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Cash	$	6,987	$	4,039
Money market		34,761		87,178
Total cash and cash equivalents	$	41,748	$	91,217
Restricted cash	$	663	$	6,389
Total	$	42,411	$	97,606

Restricted cash at September 30, 2018 includes $663,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit card agreement and automobile leases. Restricted cash at December 31, 2017 includes $6.0 million in a money market account, held in connection with the Company’s notes payable and $389,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit card agreement and automobile leases.

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Fair Value

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value

5. 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 820-10 (“Fair Value Measurement Disclosure”) requires the valuation using a three-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 nine months ended September 30, 2018 and the year ended December 31, 2017.

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 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, accounts payable, and certain accrued expenses at September 30, 2018 and December 31, 2017, 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 September 30, 2018 and December 31, 2017, as the interest rates on the notes payable approximate the rates available to the Company as of these dates.

The following are the major categories of assets measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

	September 30, 2018
	(In thousands)
	(unaudited)
Description	QuotedPrices 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	$	41,748	$	—	$	—	$	41,748
Restricted cash		663		—		—		663
Total Assets measured at fair value	$	42,411	$	—	$	—	$	42,411
Liabilities measured at fair value
Contingent consideration	$	—	$	—	$	12,104	$	12,104
Warrant liabilities		—		—		15,044		15,044
Total liabilities measured at fair value	$	—	$	—	$	27,148	$	27,148

	December 31, 2017
	(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	$	91,217	$	—	$	—	$	91,217
Restricted cash		6,389		—		—		6,389
Total Assets measured at fair value	$	97,606	$	—	$	—	$	97,606
Liabilities measured at fair value
Contingent consideration	$	—	$	—	$	12,418	$	12,418
Warrant liabilities		—		—		14,090		14,090
Total liabilities measured at fair value	$	—	$	—	$	26,508	$	26,508

The Company’s financial liabilities consisted of contingent consideration potentially payable to Sofar related to the Senhance Acquisition in September 2015 (Note 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 the income approach, using various revenue and cost assumptions and applying a probability to each outcome. The change in fair value of the contingent consideration of $0.1 million for the nine months ended September 30, 2018 was primarily due to a change in the estimated discount rate, the effect of the passage of time on the fair value measurement and the impact of foreign currency exchange rates. The change in fair value of the contingent consideration of $1.2 million for the nine months ended September 30, 2017 was primarily due to the change in discount rate, effect of the passage of time on the fair value measurement and the impact of foreign currency exchange rates. Adjustments associated with the change in fair value of contingent consideration are included in the Company’s consolidated statements of operations and comprehensive loss.

On April 28, 2017, the Company sold 24.9 million units (the “Units”), each consisting of one share of the Company’s Common Stock, a Series A warrant to purchase one share of Common Stock with an exercise price of $1.00 per share  (the “Series A Warrants”), and a Series B warrant to purchase 0.75 shares of Common Stock with an exercise price of $1.00 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. Each Series B Warrant 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.

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%, no dividends, volatility of 73.14%, and share price of $0.65 per share based on the trading price of the Company’s Common Stock. All Series A Warrants were exercised as of December 31, 2017.

The change in fair value of warrants for the nine months ended September 30, 2018 and 2017 of $24.4 million and $25.2 million, respectively was included in the Company’s consolidated statement of operations and comprehensive loss. The following table presents the inputs and valuation methodologies used for the Company’s fair value of the Series B warrants:

					April 28, 2017
Series B	September 30, 2018		December 31, 2017		(date of issuance)
Fair value	$15.0 million		$14.1 million		$6.2 million
Valuation methodology	Monte Carlo		Monte Carlo		Black-Scholes Merton
Term	3.58 years		4.33 years		5 years
Risk free rate	2.90%		2.13%		1.81%
Dividends		—		—		—
Volatility	89.47%		80.60%		73.14%
Share price	$	5.80	$	1.93	$	0.65
Probability of additional financing	100% in 2019		25% in 2018 and 75% in 2019		Not Applicable

The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements classified in Level 3, with the exception of the warrant liability, which is explained above as of September 30, 2018 and December 31, 2017:

	Valuation Methodology	Significant Unobservable Input	WeightedAverage (range, if applicable)
Contingent  consideration	Probabilityweighted income approach	Milestone dates	2018 to2021
		Discount rate Probabilityofoccurrence	9% to 12% 100%

The following table summarizes the change in fair value, as determined by Level 3 inputs, for all assets and liabilities using unobservable Level 3 inputs for the nine months ended September 30, 2018:

	Fair Value Measurementat Reporting Date (Level 3)
	(In thousands)
	(unaudited)
	Common stock			Contingent
	warrants			consideration
Balance at December 31, 2017	$	14,090		$	12,418
Exercise of warrants		(23,484	)		—
Change in fair value		24,438			81
Payment for contingent consideration		—			(395	)
Balance at September 30, 2018	$	15,044		$	12,104
Current portion		—			555
Long-term portion		15,044			11,549
Balance at September 30, 2018	$	15,044		$	12,104

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Accounts Receivable, Net

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Accounts Receivable, Net

6. Accounts Receivable, Net

The following table presents the components of accounts receivable:

	September 30,			December 31,
	2018			2017
	(In thousands)
	(unaudited)
Gross accounts receivable	$	5,742		$	1,609
Allowance for uncollectible accounts		(73	)		(73	)
Total accounts receivable, net	$	5,669		$	1,536

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Inventories

9 Months Ended

Sep. 30, 2018

Inventory Disclosure [Abstract]

Inventories

7. Inventories

The components of inventories are as follows:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Finished goods	$	4,212	$	4,432
Raw materials		6,030		6,385
Total inventories	$	10,242	$	10,817

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Other Current Assets

9 Months Ended

Sep. 30, 2018

Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]

Other Current Assets

8. Other Current Assets

The following table presents the components of other current assets:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Advances to vendors	$	6,406	$	6,403
Prepaid expenses		2,540		1,519
Other receivables		93		1,422
Total	$	9,039	$	9,344

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Property and Equipment

9 Months Ended

Sep. 30, 2018

Property Plant And Equipment [Abstract]

Property and Equipment

9. Property and Equipment

Property and equipment consisted of the following:

	September 30,			December 31,
	2018			2017
	(In thousands)
	(unaudited)
Machinery, manufacturing and demonstration equipment	$	12,095		$	10,866
Computer equipment		2,260			2,187
Furniture		628			598
Leasehold improvements		2,273			2,237
Total property and equipment		17,256			15,888
Accumulated depreciation and amortization		(10,597	)		(9,218	)
Property and equipment, net	$	6,659		$	6,670

Depreciation expense was $1,876,000 and $1,816,000, for the nine months ended September 30, 2018 and 2017, respectively.

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Goodwill, In-Process Research and Development and Intellectual Property

9 Months Ended

Sep. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill, In-Process Research and Development and Intellectual Property

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

Goodwill

Goodwill of $93.8 million was recorded in connection with the Merger, as described in Note 1, and goodwill of $38.3 million was recorded in connection with the Senhance Acquisition, as described in Note 3. The carrying value of goodwill and the change in the balance for the nine months ended September 30, 2018 is as follows:

	Goodwill
	(Inthousands)
	(unaudited)
Balance at December 31, 2017	$	71,368
Foreign currency translation impact		(699	)
Balance at September 30, 2018	$	70,669

Accumulated impairment of goodwill as of September 30, 2018 and December 31, 2017 was $61.8 million. No impairment was recorded as of September 30, 2018 and December 31, 2017.  

During the second quarter of 2017, the Company’s stock price experienced a significant decline. The Company performed a Step 1 goodwill impairment test as of the second quarter of 2017 and determined that no charge to goodwill for impairment was required during such second quarter. As of December 31, 2017, the Company elected to bypass the qualitative assessment and calculated the fair value of the Company’s reporting unit, which exceeded the carrying amount. Accordingly, no charge for goodwill impairment was required as of December 31, 2017. No impairment indicators were noted during the nine months ended September 30, 2018.

In-Process Research and Development

As described in Note 3, 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 receipt of regulatory clearance to commercialize the products associated with the IPR&D assets in the United States, the assets were deemed definite-lived, transferred to developed technology and are amortized based on their estimated useful lives.

Intellectual Property

As described in Note 3, on September 21, 2015, the Company acquired all of the developed technology related to the Senhance System and recorded $48.5 million of intellectual property. The estimated fair value of the intellectual property 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.

In November 2016, the Company agreed to enter into a technology and patents purchase agreement with Sofar to acquire from Sofar certain technology and intellectual property rights related to the Senhance Acquisition, and formerly licensed by the Company.  The technology and patents were acquired in 2017 at an acquisition price of $400,000.

The components of gross intellectual property, accumulated amortization, and net intellectual property as of September 30, 2018 and December 31, 2017 are as follows:

	September 30, 2018									December 31, 2017
	(In thousands)									(In thousands)
			(unaudited)
	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		(27,936	)		4,074		42,551		66,413		(19,724	)		5,529		52,218
Technology and patents purchased		400		(62	)		36		374		400		(30	)		50		420
Total intellectual property	$	66,813	$	(27,998	)	$	4,110	$	42,925	$	66,813	$	(19,754	)	$	5,579	$	52,638

The weighted average remaining useful life of the developed technology and technology and patents purchased was 4 years and 8.6 years, respectively as of September 30, 2018 and 4.8 years and 9.3 years, respectively as of December 31, 2017.  

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Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

Income taxes have been accounted for using the asset and liability method in accordance with ASC 740 “Income Taxes”. The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate method. The Company estimates an annual effective tax rate of 5.0% for the year ending December 31, 2018. This rate does not include the impact of any discrete items.  The Company incurred losses for the nine month period ended September 30, 2018 and is forecasting additional losses through the year, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2018. Due to the Company’s history of losses, there is not sufficient evidence to record a net deferred tax asset associated with the U.S., Luxembourg, Swiss, and Asian operations. Accordingly, a full valuation allowance has been recorded related to the net deferred tax asset in those jurisdictions. There is no net deferred tax asset recorded in relation to TransEnterix Italia and accordingly no valuation allowance has been recorded in that jurisdiction The deferred tax benefit during the nine months ended September 30, 2018 and 2017, was approximately $2.6 million and $2.3 million, respectively.

The Company’s effective tax rate for each of the nine-month periods ended September 30, 2018 and 2017 was 4.4% and 3.3%, respectively. At September 30, 2018, the Company had no unrecognized tax benefits that would affect the Company’s effective tax rate.

At September 30, 2018, the Company’s accounting for the 2017 Tax Cuts and Jobs Act is still in process; however, it expects to complete the accounting by December 2018. Updates to the Company’s calculations may result in changes to the provisional adjustments recorded at year-end.

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Accrued Expenses

9 Months Ended

Sep. 30, 2018

Accrued Liabilities Current [Abstract]

Accrued Expenses

12. Accrued Expenses

The following table presents the components of accrued expenses:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Compensation and benefits	$	4,975	$	4,533
Other		814		504
Deferred rent		437		595
Legal and professional fees		400		386
Consulting and other vendors		299		1,414
Taxes and other assessments		190		3,192
Interest		159		309
Royalties		158		41
Total	$	7,432	$	10,974

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Notes Payable

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Notes Payable

13. Notes Payable

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 has agreed to make certain term loans to the Company in the aggregate principal amount of up to $40,000,000, with funding of the first $20,000,000 tranche occurring on May 23, 2018 (the “Initial Funding Date”). The Company will be eligible to draw on the second tranche of $10,000,000 upon achievement of certain Senhance System revenue-related milestones for its 2018 fiscal year, and a third tranche of $10,000,000 upon achievement of designated trailing six month GAAP net revenue from Senhance System sales. The Company is entitled to make interest-only payments until December 1, 2020, and at the end the interest-only period, the Company will be 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 will be required to be repaid if the term loans are accelerated following an event of default.

The term loans bear 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%. Following the draw of the third tranche, the Fixed Rate will be reduced to 9.20% effective on the first interest payment date to occur during the first fiscal quarter following the draw of the third tranche. On the Initial Funding Date, the Company was obligated to pay a facility fee of $400,000, recorded as a debt discount. In addition, the Company is 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 occurs 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 is required to pay a final fee of 6.95% of the aggregate principal amount of term loans funded. The final payment fee is 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 are to be guaranteed by all current and future material foreign subsidiaries of the Company and are 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 contains customary representations and covenants that, subject to exceptions, restrict 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 are not related to its existing business. Under the terms of the Hercules Loan Agreement, the Company is required to maintain cash and/or investment property in accounts which perfect 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 are more than 90 days past due and (ii) 80% of the aggregate cash of the Company and its consolidated subsidiaries. The Agent is granted the option to invest up to $2,000,000 in any future equity offering broadly marketed by the Company to investors on the same terms as the offering to other investors.

In connection with its entrance into 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 loss of $1.4 million on the extinguishment of notes payable which is included in interest expense on the consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2018. The Company paid $680,000 in final payment obligations and $287,000 in prepayment fees under the Innovatus Loan Agreement upon repayment.

Under the Innovatus Loan Agreement, entered into on May 10, 2017, Innovatus agreed to make certain term loans in the aggregate principal amount of up to $17,000,000. Funding of the first $14,000,000 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) 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 funding, the Company paid a facility fee of $170,000 on the date of funding of the first tranche and incurred additional debt issuance costs of approximately $1.2 million, recorded as debt discount.  In addition, the Company issued warrants to the Lender to purchase shares of the Company’s common stock that will expire five (5) years from such issue date. The warrants issued in connection with funding of the first tranche entitle the Lender to purchase up to 1,244,746 shares of the Company’s common stock at an exercise price of $1.00 per share. The Company estimated the fair value of the warrants to be $300,000. 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 September 30, 2018 and December 31, 2017, the unamortized debt discount was $0 and $1.0 million, respectively.

In connection with its entrance into the Innovatus Loan Agreement, the Company repaid its then-existing credit facility with Silicon Valley Bank and Oxford Finance LLC, which loan and security agreement, as subsequently amended and restated is referred to as the “SVB Loan Agreement.” The Company recognized a loss of $308,000 on the extinguishment of notes payable which is included in interest expense on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2017. The Company paid $1.3 million in final payment obligations and $255,000 in facility fees under the SVB Loan Agreement upon repayment.

In connection with the issuance of the notes payable and amendments under the SVB Loan Agreement, the Company incurred approximately $371,000 in debt issuance costs paid to Silicon Valley Bank and Oxford Finance and third parties and $280,000 in debt issuance costs related to issuance of warrants to such prior lenders. The unamortized balance of $107,000 as of December 31, 2016, was amortized using the effective interest method, until the debt was extinguished in May 2017. At the time of extinguishment in May 2017, $63,000 of unamortized debt issuance costs were included in the loss on extinguishment of notes payable.

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Warrants

9 Months Ended

Sep. 30, 2018

Text Block [Abstract]

Warrants

14.Warrants

The following table summarizes the change in warrants for the nine months ended September 30, 2018:

						Weighted
				Weighted		Average		Weighted
				Average		Remaining		Average
	Number of			Exercise		Contractual		Grant Date
	Warrants			Price		Life (in years)		Fair Value
Outstanding at December 31, 2017		13,162,668		$	1.08		4.5	$	0.39
Exercised		(8,562,631	)		1.09		—		—
Cancelled		(95,600	)		1.65		—		—
Outstanding at September 30, 2018		4,504,437			1.03		4.0	$	0.26

In connection with the borrowings under the SVB Loan Agreement, the Company issued warrants to Silicon Valley Bank and Oxford Finance to purchase shares of the Company’s Common Stock amounting to an aggregate of 430,815 warrants under the SVB Loan Agreement. The warrants expire seven years from their respective issue date.  In February 2018, the Company terminated its relationship with a vendor who had been issued warrants to acquire 950,000 shares of Common Stock (the “Service Warrants”) with staggered vesting requirements.  As part of the termination agreement, the Company accelerated the full vesting of the Service Warrants.

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Purchase Agreement, Controlled Equity Offering and Public Offering of Common Stock

9 Months Ended

Sep. 30, 2018

Purchase Agreement Controlled Equity Offering And Public Offering Of Common Stock [Abstract]

Purchase Agreement, Controlled Equity Offering and Public Offering of Common Stock

15. Purchase Agreement, Controlled Equity Offering and Public Offering of Common Stock

On April 28, 2017, the Company sold 24.9 million units, each consisting of one share of the Company’s Common Stock, a Series A warrant to purchase one share of Common Stock, and a Series B warrant to purchase 0.75 shares of Common Stock, at a public offering price of $1.00 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 no exercise of the warrants. The closing of the public offering occurred on May 3, 2017.

On December 16, 2016, the Company entered into a purchase agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC, (“Lincoln Park”), pursuant to which the Company had the right to sell to Lincoln Park up to an aggregate of $25.0 million in shares of the Company’s Common Stock, subject to certain limitations and conditions set forth in the LPC Purchase Agreement. The Company issued to Lincoln Park 345,421 shares of Common Stock as commitment shares in consideration for the LPC Purchase Agreement through April 27, 2017. Sales under the LPC Purchase Agreement for the year ended December 31, 2016 were 300,000 shares, with gross proceeds of $412,500 and net proceeds of $392,500. Sales under the LPC Purchase Agreement for the year ended December 31, 2017 were 3,972,741 shares, with gross and net proceeds of $5,304,000. Effective April 27, 2017, the Company terminated the LPC Purchase Agreement. The LPC Purchase Agreement provided the Company with an election to terminate the Purchase Agreement for any reason or for no reason by delivering a notice to Lincoln Park, and the Company did not incur any early termination penalties in connection with the termination of the LPC Purchase Agreement.

On August 31, 2017, the Company entered into an At-the-Market Equity Offering Sales Agreement (the “2017 Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”), as sales agent, pursuant to which the Company can sell through Stifel, from time to time, up to $50.0 million in shares of Common Stock in an at-the-market offering. The Company pays Stifel a commission of approximately 3% of the aggregate gross proceeds received from all sales of common stock under the 2017 Sales Agreement. Unless otherwise terminated earlier, the 2017 Sales Agreement continues until all shares available under the Sales Agreement have been sold.

The following table summarizes the total sales under the 2017 Sales Agreement for the periods indicated (in thousands, except per share amounts):

	2017 Sales Agreement
	Year Ended December 31, 2017
Total shares of common stock sold		15,998.5
Average price per share	$	3.13
Gross proceeds	$	50,000
Commissions earned by Stifel	$	1,500
Other issuance costs	$	97

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Basic and Diluted Net Loss per Share

9 Months Ended

Sep. 30, 2018

Earnings Per Share [Abstract]

Basic and Diluted Net Loss per Share

16. Basic and Diluted Net Loss per Share

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 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. In computing diluted net loss per share for the nine months ended September 30, 2018 and 2017, no adjustment has been made to the weighted average outstanding common shares as the assumed exercise of outstanding options, warrants and restricted stock units would be anti-dilutive.

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Related Person Transactions

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Related Person Transactions

17. Related Person Transactions

On September 18, 2015, TransEnterix Italia entered into a services agreement for receipt of administrative services from Sofar and payment of rent to Sofar, a stockholder that owned approximately 9% and 12% of the Company’s Common Stock at September 30, 2018 and 2017, respectively. Expenses for administrative services were approximately $0 and $52,000 for the nine months ended September 30, 2018 and 2017, respectively. The services agreement terminated in 2017.

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. On December 30, 2016, the Company entered into an Amendment to the Senhance Acquisition purchase agreement with Sofar 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 3,722,685 shares of the Company’s Common Stock with an aggregate fair market value of €5.0 million.  On January 4, 2017, the Company issued to Sofar 3,722,685 shares of the Common Stock with a fair value of €5.0 million. The price per share was $1.404 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.

In March 2018, TransEnterix Europe entered into a Service Supply Agreement with 1Med 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 1Med S.A. Expenses under the Service Supply Agreement were approximately $62,000 for the nine months ended September 30, 2018.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

18. 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 regulatory and 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 3,722,685 shares of the Company’s Common Stock with an aggregate fair market value of €5.0 million.  As of December 31, 2017, the fair value of the contingent consideration was $12.4 million. On September 30, 2018, the fair value of the contingent consideration was $12.1 million.

Legal Proceedings 

No liability or related charge was recorded to earnings in the Company’s consolidated financial statements for legal contingencies for the nine months ended September 30, 2018 or the year ended December 31, 2017, as all pending litigation, including two putative derivative claims, was dismissed in 2017 with prejudice in the Company's favor.

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Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

19. Subsequent Events

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, including the intellectual property assets (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 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-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. 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 3.15 million shares of the Company’s common stock. A second tranche of $6.6 million in additional consideration will be payable in cash, stock or cash and stock, at the discretion of the Company, within one year after the closing date.

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.

On October 23, 2018, Hercules funded the Second Tranche of $10,000,000 under the Hercules Loan Agreement.  The Second Tranche funding remains subject to all terms and conditions under the Hercules Loan Agreement.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements 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. The results reported in these 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 financial statements and the notes thereto included in the Fiscal 2017 Form 10-K. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) have been condensed or omitted in the accompanying interim consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The accompanying Consolidated Financial Statements 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.Á.R.L; TransEnterix Asia Pte. Ltd.; TransEnterix Taiwan Ltd.; TransEnterix Japan KK and TransEnterix Israel Ltd. All inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

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 identifiable intangible assets and goodwill, contingent consideration, warrant liabilities, stock compensation expense, revenue recognition, restructuring and other charges, excess and obsolete inventory reserves, and deferred tax asset valuation allowances.

Cash and Cash Equivalents and Restricted Cash

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 at September 30, 2018 includes $663,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit cards and automobile leases. Restricted cash at December 31, 2017 includes $6.0 million in a money market account, held in connection with the Company’s notes payable and $389,000 in cash accounts held as collateral primarily under the terms of an office operating lease, credit card agreement and automobile leases.

Short-term Investments

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 September 30, 2018, short-term investments consisted of $39.7 million in U.S. government securities, all of which mature in less than a year. There were no investments as of December 31, 2017.

The Company reassesses the appropriateness of the classification of its investments at the end of each reporting period. The Company has determined that its debt securities should be classified as held-to-maturity as of September 30, 2018. This classification was based upon management’s determination that it has the positive intent and ability to hold the securities until their maturity dates, as the investments mature within 6 months and the underlying cash invested in these securities is not required for current operations. Due to the short-term maturities of these instruments, the amortized cost approximates the related fair values, which are based on level inputs as defined in Note 5. As of September 30, 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. No such impairment was recorded as of September 30, 2018.

Concentrations and Credit Risk

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 cash deposits may at times exceed the FDIC 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 net revenue 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 but has not experienced significant losses to date. The Company had four customers who accounted for 88% of the Company’s net accounts receivable at September 30, 2018 and one customer who constituted 88% of the Company’s net accounts receivable at December 31, 2017. The Company had five customers who accounted for 68% of the Company’s net revenue for the nine months ended September 30, 2018 and two customers who constituted 89% of the Company’s net revenue for the nine months ended September 30, 2017. The Company had four customers who accounted for 96% of the Company’s net revenue for the three months ended September 30, 2018 and five customers who constituted 100% of the Company’s net revenue for the three months ended September 30, 2017.

Accounts Receivable

Accounts Receivable

Accounts receivable are recorded at net realizable value, which includes an allowance for estimated uncollectable accounts. The allowance for uncollectible accounts was determined based on historical collection experience.

Inventories

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.

Identifiable Intangible Assets and Goodwill

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. This method approximates the period over which the Company expects to receive the benefit from these assets.  No impairment existed at September 30, 2018 or December 31, 2017.

Indefinite-lived intangible assets, such as goodwill, are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis at December 31 or when events or changes in circumstances indicate evidence a potential impairment exists, using a fair value based test. The Company continues to operate in one segment, which is considered to be the sole reporting unit and therefore, goodwill is tested for impairment at the enterprise level. No impairment existed at September 30, 2018 or December 31, 2017.

In-Process Research and Development

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 was acquired on September 21, 2015.

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 amortized based on their estimated useful lives.

Property and Equipment

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	Lesserof 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

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

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 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 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 contingent consideration is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss.

Deferred Gain from Sale of SurgiBot Assets

Deferred Gain from Sale of SurgiBot Assets

In conjunction with the agreement with GBIL in relation to the transfer of the SurgiBot System assets, the Company received $7.5 million in December 2017.  This amount was included in deferred gain from sale of SurgiBot assets in the consolidated balance sheet pending transfer of the assets in March 2018 and was recognized in gain from sale of SurgiBot assets in the consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2018.

Warrant Liabilities

Warrant Liabilities

The Company’s Series B Warrants 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

Translation of Foreign Currencies

The functional currency of the Company’s operational foreign subsidiaries is Euros. 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.

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 statement 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 nine months ended September 30, 2018 and 2017 were not significant.

Risk and Uncertainties

Risk and Uncertainties

The Company is subject to a number of risks similar to other similarly-sized companies in the medical device industry. These risks include, without limitation, the historical lack of profitability; the Company’s ability to raise additional capital; 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, Italy, other countries in the European Union, and other countries in which the Company intends to operate; its ability to attract and retain key management, marketing and scientific personnel; competition from new entrants; 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.

Revenue Recognition

Revenue Recognition

The Company adopted ASC Topic 606, Revenue from Contracts with Customers, on January 1, 2018. The Company’s revenue consists of product revenue resulting from the sale of systems, 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 system sale arrangements generally contain multiple products and services. For these bundled 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 bundled 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 system sale arrangements include a combination of the following performance obligations: system(s), system components, instruments, accessories, and system service. The Company’s 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. The Company considers the service terms in the arrangements that are legally enforceable to be performance obligations. Other than service, the Company generally satisfies all of the performance obligations up-front. System components, system accessories, instruments, accessories, and service are also sold on a standalone basis.

The Company recognizes revenues 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 systems and system components sold directly to end customers, 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 systems sold through distributors, for which distributors are responsible for installation, revenue is recognized generally at the time of shipment. The Company’s system arrangements generally do not provide a right of return. The 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 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 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 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 types and geography:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
	(in thousands)				(in thousands)
	(unaudited)				(unaudited)
U.S.
Systems	$	868	$	—	$	1,742	$	—
Instruments and accessories		426		—		835		—
Services		87		—		137		—
Total U.S. revenue		1,381		—		2,714		—
Outside of U.S. ("OUS")
Systems		3,450		—		10,686		2,609
Instruments and accessories		441		10		2,653		683
Services		150		173		525		421
Total OUS revenue		4,041		183		13,864		3,713
Total
Systems		4,318		—		12,428		2,609
Instruments and accessories		867		10		3,488		683
Services		237		173		662		421
Total revenue	$	5,422	$	183	$	16,578	$	3,713

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

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 $4.4 million as of September 30, 2018.

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. Contract assets are included in accounts receivable and totaled $0.1 million and $0 as of September 30, 2018 and 2017, 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 for the nine months ended September 30, 2018 and 2017, that was included in the deferred revenue balance at the beginning of each reporting period was $0.3 million and $0.2 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.

Cost of Revenue

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.

Research and Development Costs

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.

Stock-Based Compensation

Stock-Based Compensation

The Company follows ASC 718 “Stock Compensation” and ASC 505-50 “Equity-Based Payments to Non-employees”, which provide guidance in accounting for share-based awards exchanged for services rendered and requires companies to expense the estimated fair value of these awards over the requisite service period. For awards granted to non-employees, the Company determines the fair value of the stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

The Company recognizes compensation expense for stock-based awards based on estimated fair values on the date of grant for awards granted to employees. The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock options. 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 $6,694,000 and $5,321,000 for the nine months ended September 30, 2018 and 2017, respectively.

The TransEnterix, Inc. 2007 Incentive Compensation Plan (the “Plan”) was originally approved by the Company’s board of directors, (the “Board”) and adopted by the majority of the Company’s stockholders on November 13, 2007. The Plan has been subsequently amended, and approved by stockholders, as required, to increase the number of shares available under the Plan and to make other changes.  As of May 24, 2018, the date of the Company’s annual meeting of stockholders for 2018, the number of shares of common stock, par value $0.001 per share (the “Common Stock”), authorized under the Plan is 40,940,000.

Income Taxes

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, 2017. As a result of the newly enacted tax rate, the Company adjusted its 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, 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 estimates that the deemed repatriation will not result in any additional U.S. income tax liability as it estimates it currently has no undistributed foreign earnings.

In accordance with Staff Accounting Bulletin (“SAB”) No. 118, income tax effects of the Tax Legislation may be refined upon obtaining, preparing, or analyzing additional information during a measurement period of one year.  During the measurement period provisional amounts may be adjusted for the effects, if any, of interpretive guidance issued after December 31, 2017, by U.S. regulatory and standard-setting bodies.

Comprehensive Loss

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

Segments

The Company operates in one 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 60% of the Company’s total consolidated assets are located within the U.S. as of September 30, 2018 and December 31, 2017. The remaining assets are mostly located in Europe and are primarily related to the Company’s facility in Italy, and include goodwill, intellectual property, other current assets, property and equipment, cash, accounts receivable and inventory of $91.8 million and $99.9 million at September 30, 2018 and December 31, 2017, respectively. Total assets outside of the U.S. excluding goodwill amounted to 31% of total consolidated assets at September 30, 2018 and December 31, 2017. The Company recognizes sales by geographic area based on the country in which the customer is based. For the nine months ended September 30, 2018, 16% of net revenue was generated in the U.S. and 83% was generated in Europe. For the nine months ended September 30, 2017, 62% of net revenue was generated in Europe and 38% in Asia.    

Impact of Recently Issued Accounting Standards

Impact of Recently Issued Accounting Standards  

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing this ASU and has not yet determined the impact ASU 2018-13 may have on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments (“ASU 2018-07”). This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. The Company is currently assessing this ASU and has not yet determined the impact ASU 2018-07 may have on its consolidated financial statements.

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 feature 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 should not have a material impact on the consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) which addresses changes to reduce the presentation diversity of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees.  The guidance became effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. An entity that elects early adoption must adopt all of the amendments in the same period. The new standard will be applied retrospectively, but may be applied prospectively if retrospective application would be impracticable. The adoption of this ASU did not have an impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases. The new standard 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 all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In July 2018, the FASB issued ASU 2018-10, which provides narrow-scope improvements to the lease standard. We expect to elect the ‘package of practical expedients’, which permits us to forgo reassessment of our prior conclusions about lease identification, lease classification and initial direct costs for leases entered into prior to the effective date. Additionally, we expect to elect the practical expedient to not provide comparative reporting periods; therefore, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. We do not expect to elect the ‘use-of-hindsight practical expedient’ or the land easement transition relief, the latter of which is not applicable to our industry. Upon adoption, operating leases will be reported on the statement of financial position as gross-up assets and liabilities. The Company has begun evaluating and planning for adoption and implementation of this ASU, including reviewing all material leases, the ASU practical expedient guidelines and current accounting policy elections, and assessing the overall financial statement impact. We expect this ASU will have a material impact on the Company’s financial position. The impact on the Company’s results of operations is currently being evaluated. The impact of this ASU is non-cash in nature and is not expected to affect the Company’s cash flows.

In February 2017, the FASB issued ASU No. 2017-05, Other Income — Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) — Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The new standard clarifies the scope of guidance applicable to sales of nonfinancial assets and also provides guidance on accounting for partial sales of such assets.  The adoption of this ASU did not have an impact on the consolidated financial statements.

The Company adopted the New Revenue Standard in the first quarter of fiscal year 2018 using the modified retrospective method resulting in a cumulative catch-up adjustment to opening retained earnings.  The Company applied the New Revenue Standard to all contracts and concluded that the timing and measurement of revenue recognition is materially consistent under the New Revenue Standard, except for the future billings related to future service included in its multi-year contracts that should be part of the consideration allocated to all performance obligations under the New Revenue Standard. Under the prior standard, future service billings were considered to be contingent revenue, and therefore, were not included in the consideration allocated. Accordingly, the amount of consideration allocated to the performance obligations identified in the Company’s system arrangements is different under the New Revenue Standard than the amount allocated under the prior standard. In general, this will result in an acceleration of the amount of revenue recognized for system sales with multi-year service contracts. Due to limited sales to date, the Company recorded a $11,000 cumulative catch-up adjustment to retained earnings in the first quarter of fiscal year 2018, offset by reductions in accounts receivable of $4,000 and deferred revenue of $15,000. Under the prior standard, revenue would have been $15,000 greater for the nine months ended September 30, 2018 than under the New Revenue Standard.

Reclassifications

Reclassifications

Certain prior year amounts within the consolidated statement of operations and comprehensive loss have been reclassified.  Such reclassifications have no effect on previously recorded net loss.

Classification of Certain Items Within the Company's Form 10-K

Classification of Certain Items Within the Company’s Form 10-K

Certain reclassifications of prior period amounts will be made within the Company’s Form 10-K filing for the year ended December 31, 2018 to conform to current period presentation. Specifically, during the nine months ended September 30, 2018, the Company determined that the amount related to the deferred gain on sale of SurgiBot assets as reflected within one line in the operating activities section of the consolidated statement of cash flows for the year ended December 31, 2017 should have been classified as cash flows provided from investing activities.  There is no impact to the consolidated statements of operations or consolidated balance sheets. The Company evaluated the effect of this misclassification and concluded it was not material to any of its previously issued consolidated financial statements. Upon revision, cash flows from operating activities for the year ended December 31, 2017, will decrease by $7.5 million to cash and cash equivalents used in operating activities of $47.3 million and cash flows from investing activities will increase by $7.5 million to cash and cash equivalents provided by investing activities of $5.5 million.  There is no impact of the reclassification to the nine months ended September 30, 2017.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Summary of Estimated Lives of Assets

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	Lesserof lease term or 3 to 10 years

Summary of Revenue Disaggregated by Types and Geography

The following table presents revenue disaggregated by types and geography:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
	(in thousands)				(in thousands)
	(unaudited)				(unaudited)
U.S.
Systems	$	868	$	—	$	1,742	$	—
Instruments and accessories		426		—		835		—
Services		87		—		137		—
Total U.S. revenue		1,381		—		2,714		—
Outside of U.S. ("OUS")
Systems		3,450		—		10,686		2,609
Instruments and accessories		441		10		2,653		683
Services		150		173		525		421
Total OUS revenue		4,041		183		13,864		3,713
Total
Systems		4,318		—		12,428		2,609
Instruments and accessories		867		10		3,488		683
Services		237		173		662		421
Total revenue	$	5,422	$	183	$	16,578	$	3,713

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Cash, Cash Equivalents, and Restricted Cash (Tables)

9 Months Ended

Sep. 30, 2018

Cash Cash Equivalents Restricted Cash And Restricted Cash Equivalents [Abstract]

Summary of Cash, Cash Equivalents and Restricted Cash

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

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Cash	$	6,987	$	4,039
Money market		34,761		87,178
Total cash and cash equivalents	$	41,748	$	91,217
Restricted cash	$	663	$	6,389
Total	$	42,411	$	97,606

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Measurements Disclosure [Line Items]

Summary of Assets Measured at Fair Value on Recurring Basis

The following are the major categories of assets measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

	September 30, 2018
	(In thousands)
	(unaudited)
Description	QuotedPrices 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	$	41,748	$	—	$	—	$	41,748
Restricted cash		663		—		—		663
Total Assets measured at fair value	$	42,411	$	—	$	—	$	42,411
Liabilities measured at fair value
Contingent consideration	$	—	$	—	$	12,104	$	12,104
Warrant liabilities		—		—		15,044		15,044
Total liabilities measured at fair value	$	—	$	—	$	27,148	$	27,148

	December 31, 2017
	(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	$	91,217	$	—	$	—	$	91,217
Restricted cash		6,389		—		—		6,389
Total Assets measured at fair value	$	97,606	$	—	$	—	$	97,606
Liabilities measured at fair value
Contingent consideration	$	—	$	—	$	12,418	$	12,418
Warrant liabilities		—		—		14,090		14,090
Total liabilities measured at fair value	$	—	$	—	$	26,508	$	26,508

Change in Fair Value for All Assets and Liabilities Using Unobservable Level 3 Inputs As Determined By Level 3 Inputs

The following table summarizes the change in fair value, as determined by Level 3 inputs, for all assets and liabilities using unobservable Level 3 inputs for the nine months ended September 30, 2018:

	Fair Value Measurementat Reporting Date (Level 3)
	(In thousands)
	(unaudited)
	Common stock			Contingent
	warrants			consideration
Balance at December 31, 2017	$	14,090		$	12,418
Exercise of warrants		(23,484	)		—
Change in fair value		24,438			81
Payment for contingent consideration		—			(395	)
Balance at September 30, 2018	$	15,044		$	12,104
Current portion		—			555
Long-term portion		15,044			11,549
Balance at September 30, 2018	$	15,044		$	12,104

Level 3 [Member]

Fair Value Measurements Disclosure [Line Items]

Quantitative Information about Inputs and Valuation Methodologies Used for Fair Value Measurements Classification

The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements classified in Level 3, with the exception of the warrant liability, which is explained above as of September 30, 2018 and December 31, 2017:

	Valuation Methodology	Significant Unobservable Input	WeightedAverage (range, if applicable)
Contingent  consideration	Probabilityweighted income approach	Milestone dates	2018 to2021
		Discount rate Probabilityofoccurrence	9% to 12% 100%

Series B Warrant [Member]

Fair Value Measurements Disclosure [Line Items]

Quantitative Information about Inputs and Valuation Methodologies Used for Fair Value Measurements Classification

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

					April 28, 2017
Series B	September 30, 2018		December 31, 2017		(date of issuance)
Fair value	$15.0 million		$14.1 million		$6.2 million
Valuation methodology	Monte Carlo		Monte Carlo		Black-Scholes Merton
Term	3.58 years		4.33 years		5 years
Risk free rate	2.90%		2.13%		1.81%
Dividends		—		—		—
Volatility	89.47%		80.60%		73.14%
Share price	$	5.80	$	1.93	$	0.65
Probability of additional financing	100% in 2019		25% in 2018 and 75% in 2019		Not Applicable

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Accounts Receivable, Net (Tables)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Summary of Accounts Receivable

The following table presents the components of accounts receivable:

	September 30,			December 31,
	2018			2017
	(In thousands)
	(unaudited)
Gross accounts receivable	$	5,742		$	1,609
Allowance for uncollectible accounts		(73	)		(73	)
Total accounts receivable, net	$	5,669		$	1,536

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Inventories (Tables)

9 Months Ended

Sep. 30, 2018

Inventory Disclosure [Abstract]

Schedule of Inventory

The components of inventories are as follows:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Finished goods	$	4,212	$	4,432
Raw materials		6,030		6,385
Total inventories	$	10,242	$	10,817

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Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2018

Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]

Schedule of Other Current Assets

The following table presents the components of other current assets:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Advances to vendors	$	6,406	$	6,403
Prepaid expenses		2,540		1,519
Other receivables		93		1,422
Total	$	9,039	$	9,344

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2018

Property Plant And Equipment [Abstract]

Summary of Property and Equipment

Property and equipment consisted of the following:

	September 30,			December 31,
	2018			2017
	(In thousands)
	(unaudited)
Machinery, manufacturing and demonstration equipment	$	12,095		$	10,866
Computer equipment		2,260			2,187
Furniture		628			598
Leasehold improvements		2,273			2,237
Total property and equipment		17,256			15,888
Accumulated depreciation and amortization		(10,597	)		(9,218	)
Property and equipment, net	$	6,659		$	6,670

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Goodwill, In-Process Research and Development and Intellectual Property (Tables)

9 Months Ended

Sep. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Carrying Value of Goodwill and Change in Balance

The carrying value of goodwill and the change in the balance for the nine months ended September 30, 2018 is as follows:

	Goodwill
	(Inthousands)
	(unaudited)
Balance at December 31, 2017	$	71,368
Foreign currency translation impact		(699	)
Balance at September 30, 2018	$	70,669

Carrying Value of Company's Intangible Assets and Change in Balance

The components of gross intellectual property, accumulated amortization, and net intellectual property as of September 30, 2018 and December 31, 2017 are as follows:

	September 30, 2018									December 31, 2017
	(In thousands)									(In thousands)
			(unaudited)
	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		(27,936	)		4,074		42,551		66,413		(19,724	)		5,529		52,218
Technology and patents purchased		400		(62	)		36		374		400		(30	)		50		420
Total intellectual property	$	66,813	$	(27,998	)	$	4,110	$	42,925	$	66,813	$	(19,754	)	$	5,579	$	52,638

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Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2018

Accrued Liabilities Current [Abstract]

Schedule of Accrued Expenses

The following table presents the components of accrued expenses:

	September 30,		December 31,
	2018		2017
	(In thousands)
	(unaudited)
Compensation and benefits	$	4,975	$	4,533
Other		814		504
Deferred rent		437		595
Legal and professional fees		400		386
Consulting and other vendors		299		1,414
Taxes and other assessments		190		3,192
Interest		159		309
Royalties		158		41
Total	$	7,432	$	10,974

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Warrants (Tables)

9 Months Ended

Sep. 30, 2018

Text Block [Abstract]

Summary of Change in Warrant

The following table summarizes the change in warrants for the nine months ended September 30, 2018:

						Weighted
				Weighted		Average		Weighted
				Average		Remaining		Average
	Number of			Exercise		Contractual		Grant Date
	Warrants			Price		Life (in years)		Fair Value
Outstanding at December 31, 2017		13,162,668		$	1.08		4.5	$	0.39
Exercised		(8,562,631	)		1.09		—		—
Cancelled		(95,600	)		1.65		—		—
Outstanding at September 30, 2018		4,504,437			1.03		4.0	$	0.26

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Purchase Agreement, Controlled Equity Offering and Public Offering of Common Stock (Tables)

9 Months Ended

Sep. 30, 2018

Purchase Agreement Controlled Equity Offering And Public Offering Of Common Stock [Abstract]

Schedule of Total Sales under 2017 Sales Agreement

The following table summarizes the total sales under the 2017 Sales Agreement for the periods indicated (in thousands, except per share amounts):

	2017 Sales Agreement
	Year Ended December 31, 2017
Total shares of common stock sold		15,998.5
Average price per share	$	3.13
Gross proceeds	$	50,000
Commissions earned by Stifel	$	1,500
Other issuance costs	$	97

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Organization and Capitalization - Additional Information (Detail) - USD ($)		1 Months Ended	3 Months Ended
	Dec. 18, 2017	Dec. 31, 2017	Mar. 31, 2018	Sep. 30, 2018	Dec. 06, 2013
Organization And Capitalization [Line Items]
Common stock, shares authorized		750,000,000		750,000,000
Preferred stock, shares authorized					25,000,000
Preferred stock, par value (in dollars per share)					$ 0.01
Minimum [Member]
Organization And Capitalization [Line Items]
Common stock, shares authorized					225,000,000
Maximum [Member]
Organization And Capitalization [Line Items]
Common stock, shares authorized					750,000,000
China National Scientific and Instruments and Materials Company [Member]
Organization And Capitalization [Line Items]
Proceeds from distribution agreement		$ 7,500,000
Proceeds from distribution agreement including equity investment			$ 7,500,000
Distribution agreement, equity investment			$ 3,000,000
Distribution agreement, equity investment per share	$ 2.33
Distribution minimum royalties payment	$ 14,000,000
Distribution minimum royalties payment term	5 years
China National Scientific and Instruments and Materials Company [Member] | Minimum [Member]
Organization And Capitalization [Line Items]
Expected proceeds from distribution agreement	$ 29,000,000

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Summary of Significant Accounting Policies - Additional Information (Detail)	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($) $ / shares	Mar. 31, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) Segment $ / shares	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($) $ / shares	May 24, 2018 $ / shares shares
Accounting Policies [Line Items]
Short-term investments	$ 39,670,000			$ 39,670,000
Impairment charges				$ 0		$ 0
Deferred gain from sale of SurgiBot assets						$ 7,500,000
Period of service sale arrangement				5 years
Period of service sale arrangement at stated service price				4 years
Product warranty				1 year
Revenue, remaining performance obligation	4,400,000			$ 4,400,000
Contract assets included in accounts receivable	$ 100,000		$ 0	100,000	$ 0
Revenue recognized, included in deferred revenue				$ 300,000	200,000
Common stock, capital shares authorized for issuance | shares							40,940,000
Common stock, par value | $ / shares	$ 0.001			$ 0.001		$ 0.001	$ 0.001
Statutory income tax rate				21.00%
Decrease in deferred tax assets due to newly enacted tax rate						$ 36,100,000
Decrease in valuation allowance due to newly enacted tax rate						36,100,000
Tax cuts and jobs act of 2017, measurement period				1 year
Number of business segments | Segment				1
Assets	$ 227,559,000			$ 227,559,000		250,251,000
Cumulative catch-up adjustment to retained earnings				11,000
Reductions in accounts receivable				(4,262,000)	886,000
Cash and cash equivalents used in operating activities				(35,641,000)	(37,549,000)	47,300,000
Cash and cash equivalents provided by investing activities				(35,581,000)	(1,906,000)	5,500,000
Restatement Adjustment [Member]
Accounting Policies [Line Items]
Cash and cash equivalents used in operating activities						(7,500,000)
Cash and cash equivalents provided by investing activities						$ 7,500,000
ASU 2014-09 [Member]
Accounting Policies [Line Items]
Cumulative catch-up adjustment to retained earnings		$ 11,000
Reductions in accounts receivable		4,000
Deferred revenue		$ 15,000
ASU 2014-09 [Member] | Prior Standard, Revenue [Member]
Accounting Policies [Line Items]
Deferred revenue	$ 15,000			$ 15,000
U.S. [Member]
Accounting Policies [Line Items]
Percentage of total consolidated assets	60.00%			60.00%		60.00%
Europe [Member]
Accounting Policies [Line Items]
Assets	$ 91,800,000			$ 91,800,000		$ 99,900,000
International [Member]
Accounting Policies [Line Items]
Percentage of total consolidated assets, excluding goodwill	31.00%			31.00%		31.00%
Stock Options [Member]
Accounting Policies [Line Items]
Share based compensation, expense recognized				$ 6,694,000	$ 5,321,000
Patents [Member]
Accounting Policies [Line Items]
Amortization period				10 years
Minimum [Member]
Accounting Policies [Line Items]
Amortization period				5 years
Minimum [Member] | Developed Technology [Member]
Accounting Policies [Line Items]
Amortization period				5 years
Maximum [Member]
Accounting Policies [Line Items]
Amortization period				10 years
Maximum [Member] | Developed Technology [Member]
Accounting Policies [Line Items]
Amortization period				7 years
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Four Customer [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage				88.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | One Customer [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage						88.00%
Customer Concentration Risk [Member] | Sales [Member] | Four Customer [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage	96.00%
Customer Concentration Risk [Member] | Sales [Member] | Five Customer [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage			100.00%	68.00%
Customer Concentration Risk [Member] | Sales [Member] | Two Customer [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage					89.00%
Geographic Concentration Risk [Member] | Sales [Member] | U.S. [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage				16.00%
Geographic Concentration Risk [Member] | Sales [Member] | Europe [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage				83.00%	62.00%
Geographic Concentration Risk [Member] | Sales [Member] | Asia [Member]
Accounting Policies [Line Items]
Concentration Risk Percentage					38.00%
U.S. Government Securities [Member]
Accounting Policies [Line Items]
Short-term investments	$ 39,700,000			$ 39,700,000		$ 0
Short-term investments, other-than-temporary impairment				0
Held In Cash Money Market Account [Member]
Accounting Policies [Line Items]
Restricted cash						6,000,000
Held In Cash Collateral Accounts [Member]
Accounting Policies [Line Items]
Restricted cash	$ 663,000			$ 663,000		$ 389,000

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Summary of Significant Accounting Policies - Summary of Estimated Lives of Assets (Detail)	9 Months Ended
	Sep. 30, 2018
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	3 years
Furniture [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	5 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	Lesser of lease term or 3 to 10 years
Minimum [Member] | Machinery, Manufacturing Equipment and Demonstration Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	3 years
Minimum [Member] | Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	3 years
Maximum [Member] | Machinery, Manufacturing Equipment and Demonstration Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	5 years
Maximum [Member] | Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	10 years

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Summary of Significant Accounting Policies - Summary of Revenue Disaggregated by Types and Geography (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation Of Revenue [Line Items]
Total revenue	$ 5,422	$ 183	$ 16,578	$ 3,713
Services [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	237	173	662	421
Systems [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	4,318		12,428	2,609
Instruments and Accessories [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	867	10	3,488	683
U.S. [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	1,381		2,714
U.S. [Member] | Services [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	87		137
U.S. [Member] | Systems [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	868		1,742
U.S. [Member] | Instruments and Accessories [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	426		835
Outside of U.S. [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	4,041	183	13,864	3,713
Outside of U.S. [Member] | Services [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	150	173	525	421
Outside of U.S. [Member] | Systems [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	3,450		10,686	2,609
Outside of U.S. [Member] | Instruments and Accessories [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	$ 441	$ 10	$ 2,653	$ 683

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Acquisition of Senhance Surgical Robotic System - Additional Information (Detail) - Senhance Surgical Robotic System Acquisition [Member]			9 Months Ended
	Dec. 30, 2016 EUR (€) shares	Sep. 21, 2015 USD ($) shares	Sep. 30, 2018 EUR (€)	Dec. 31, 2016 USD ($)	Sep. 21, 2015 EUR (€)
Business Acquisition [Line Items]
Common shares issued | shares		15,543,413
First Tranche [Member]
Business Acquisition [Line Items]
Cash consideration | $		$ 25,000,000
Second Tranche [Member]
Business Acquisition [Line Items]
Common shares issued | shares	3,722,685
Aggregate fair market value	€ 5,000,000
Aggregate fair market value payment	€ 5,000,000
Second Tranche [Member] | Lincoln Park Capital Fund, LLC [Member]
Business Acquisition [Line Items]
Gross proceeds from financing | $				$ 50,000,000
Interest rate				9.00%
Second Tranche [Member] | Minimum [Member] | Lincoln Park Capital Fund, LLC [Member]
Business Acquisition [Line Items]
Cash on hand | $				$ 50,000,000
Third Tranche [Member]
Business Acquisition [Line Items]
Cash consideration payable					€ 15,000,000
Third Tranche [Member] | Minimum [Member]
Business Acquisition [Line Items]
Target revenue to be achieved					25,000,000
Fourth Tranche [Member]
Business Acquisition [Line Items]
Cash consideration			€ 2,100,000
Cash consideration payable					2,500,000
U.S. Dollars [Member]
Business Acquisition [Line Items]
Cash consideration | $		$ 25,000,000
Euro [Member]
Business Acquisition [Line Items]
Cash consideration payable					€ 27,500,000

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Cash, Cash Equivalents, and Restricted Cash - Summary of Cash, Cash Equivalents and Restricted Cash (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Cash Cash Equivalents Restricted Cash And Restricted Cash Equivalents [Abstract]
Cash	$ 6,987	$ 4,039
Money market	34,761	87,178
Total cash and cash equivalents	41,748	91,217
Restricted cash	663	6,389
Total	$ 42,411	$ 97,606	$ 30,869	$ 34,590

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Cash, Cash Equivalents, and Restricted Cash - Additional Information (Detail) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Restricted Cash And Cash Equivalents Items [Line Items]
Restricted cash	$ 663,000	$ 6,389,000
Held In Cash Money Market Account [Member]
Restricted Cash And Cash Equivalents Items [Line Items]
Restricted cash		6,000,000
Held In Cash Collateral Accounts [Member]
Restricted Cash And Cash Equivalents Items [Line Items]
Restricted cash	$ 663,000	$ 389,000

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Fair Value - Additional Information (Detail)		3 Months Ended		9 Months Ended
	Apr. 28, 2017 USD ($) $ / shares shares	Sep. 30, 2018 USD ($) $ / shares	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) $ / shares	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($) $ / shares
Fair Value Measurements Disclosure [Line Items]
Transfers of assets between Level 1, Level 2, and Level 3 of the fair value hierarchy		$ 0		$ 0		$ 0
Transfers of liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy		0		0		0
Warrants to purchase common shares | shares	24,900,000
Offering price | $ / shares	$ 1.00
Change in fair value of warrant liabilities		8,760,000	$ 22,887,000	24,438,000	$ 25,213,000
Series A Warrant [Member]
Fair Value Measurements Disclosure [Line Items]
Warrants, exercise price | $ / shares	$ 1.00
Warrant expiration date	Oct. 31, 2017
Series A Warrant [Member] | Black-Scholes Merton Model [Member]
Fair Value Measurements Disclosure [Line Items]
Estimated fair value of warrants	$ 2,500,000
Fair value input, share price | $ / shares	$ 0.65
Series A Warrant [Member] | Black-Scholes Merton Model [Member] | Measurement Input, Expected Term [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value input, term	1 year
Series A Warrant [Member] | Black-Scholes Merton Model [Member] | Measurement Input, Risk Free Interest Rate [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value input, risk free rate	0.0107
Series A Warrant [Member] | Black-Scholes Merton Model [Member] | Measurement Input, Expected Dividend Payment [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value input, risk free rate	0.00
Series A Warrant [Member] | Black-Scholes Merton Model [Member] | Measurement Input, Price Volatility [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value input, risk free rate	0.7314
Series B Warrant [Member]
Fair Value Measurements Disclosure [Line Items]
Warrants, exercise price | $ / shares	$ 1.00
Estimated fair value of warrants	$ 6,200,000	$ 15,000,000		$ 15,000,000		$ 14,100,000
Fair value input, share price | $ / shares	$ 0.65	$ 5.80		$ 5.80		$ 1.93
Series B Warrant [Member] | Measurement Input, Expected Term [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value input, term	5 years	3 years 6 months 29 days		3 years 6 months 29 days		4 years 3 months 29 days
Series B Warrant [Member] | Measurement Input, Risk Free Interest Rate [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value input, risk free rate	1.81	2.90		2.90		2.13
Series B Warrant [Member] | Measurement Input, Price Volatility [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value input, risk free rate	73.14	89.47		89.47		80.60
Common Stock [Member]
Fair Value Measurements Disclosure [Line Items]
Number of common stock or warrants in each unit | shares	1
Common Stock [Member] | Series A Warrant [Member]
Fair Value Measurements Disclosure [Line Items]
Number of common stock or warrants in each unit | shares	1
Common Stock [Member] | Series B Warrant [Member]
Fair Value Measurements Disclosure [Line Items]
Number of common stock or warrants in each unit | shares	0.75
Senhance Surgical Robotic System Acquisition [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value of contingent consideration				$ 100,000	$ 1,200,000

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Fair Value - Summary of Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Assets measured at fair value
Cash and cash equivalents	$ 41,748	$ 91,217
Restricted cash	663	6,389
Total Assets measured at fair value	42,411	97,606
Liabilities measured at fair value
Contingent consideration	12,104	12,418
Warrant liabilities	15,044	14,090
Total liabilities measured at fair value	27,148	26,508
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets measured at fair value
Cash and cash equivalents	41,748	91,217
Restricted cash	663	6,389
Total Assets measured at fair value	42,411	97,606
Significant Unobservable Inputs (Level 3) [Member]
Liabilities measured at fair value
Contingent consideration	12,104	12,418
Warrant liabilities	15,044	14,090
Total liabilities measured at fair value	$ 27,148	$ 26,508

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Fair Value - Quantitative Information about Inputs and Valuation Methodologies Used for Fair Value Measurements Classification (Detail) $ / shares in Units, $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2018 USD ($) $ / shares	Dec. 31, 2017 USD ($) $ / shares	Apr. 28, 2017 USD ($) $ / shares
Senhance Surgical Robotic System Acquisition [Member] | Significant Unobservable Inputs (Level 3) [Member] | Contingent Consideration [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Probability of occurrence	100.00%
Senhance Surgical Robotic System Acquisition [Member] | Significant Unobservable Inputs (Level 3) [Member] | Contingent Consideration [Member] | Minimum [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Milestone dates	2018
Senhance Surgical Robotic System Acquisition [Member] | Significant Unobservable Inputs (Level 3) [Member] | Contingent Consideration [Member] | Maximum [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Milestone dates	2021
Measurement Input, Discount Rate [Member] | Senhance Surgical Robotic System Acquisition [Member] | Significant Unobservable Inputs (Level 3) [Member] | Contingent Consideration [Member] | Minimum [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	0.09
Measurement Input, Discount Rate [Member] | Senhance Surgical Robotic System Acquisition [Member] | Significant Unobservable Inputs (Level 3) [Member] | Contingent Consideration [Member] | Maximum [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	0.12
Series B Warrant [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value | $	$ 15.0	$ 14.1	$ 6.2
Valuation methodology	trxc:MonteCarloMember	trxc:MonteCarloMember	trxc:BlackScholesMertonMember
Share price | $ / shares	$ 5.80	$ 1.93	$ 0.65
Probability of additional financing in 2018		25.00%
Probability of additional financing in 2019	100.00%	75.00%
Series B Warrant [Member] | Measurement Input, Expected Term [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Term	3 years 6 months 29 days	4 years 3 months 29 days	5 years
Series B Warrant [Member] | Measurement Input, Risk Free Interest Rate [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Risk free rate	2.90	2.13	1.81
Series B Warrant [Member] | Measurement Input, Price Volatility [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Risk free rate	89.47	80.60	73.14

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Fair Value - Change in Fair Value for All Assets and Liabilities Using Unobservable Level 3 Inputs As Determined By Level 3 Inputs (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Common Stock Warrants [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 14,090
Exercise of warrants	(23,484)
Change in fair value	24,438
Long-term portion	15,044
Ending balance	15,044
Contingent Consideration [Member]
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance	12,418
Change in fair value	81
Current portion	555
Long-term portion	11,549
Payment for contingent consideration	(395)
Ending balance	$ 12,104

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Accounts Receivable, Net - Summary of Accounts Receivable (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Gross accounts receivable	$ 5,742	$ 1,609
Allowance for uncollectible accounts	(73)	(73)
Total accounts receivable, net	$ 5,669	$ 1,536

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Inventories - Schedule of Inventory (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Finished goods	$ 4,212	$ 4,432
Raw materials	6,030	6,385
Total inventories	$ 10,242	$ 10,817

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Other Current Assets - Schedule of Other Current Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]
Advances to vendors	$ 6,406	$ 6,403
Prepaid expenses	2,540	1,519
Other receivables	93	1,422
Total	$ 9,039	$ 9,344

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Property and Equipment - Summary of Property and Equipment (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	$ 17,256	$ 15,888
Accumulated depreciation and amortization	(10,597)	(9,218)
Property and equipment, net	6,659	6,670
Machinery, Manufacturing and Demonstration Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	12,095	10,866
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	2,260	2,187
Furniture [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	628	598
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, Gross	$ 2,273	$ 2,237

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Property and Equipment - Additional Information (Detail) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Property Plant And Equipment [Abstract]
Depreciation	$ 1,876,000	$ 1,816,000

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Goodwill, In-Process Research and Development and Intellectual Property - Additional Information (Detail) - USD ($)		3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 21, 2015	Jun. 30, 2017	Sep. 30, 2018	Dec. 31, 2017
Goodwill And Intangible Assets [Line Items]
Goodwill			$ 70,669,000	$ 71,368,000
Accumulated impairment of goodwill			61,800,000	61,800,000
Goodwill impairment		$ 0	$ 0	$ 0
In-Process Research and Development [Member]
Goodwill And Intangible Assets [Line Items]
Discount rate	45.00%
Intellectual Property [Member]
Goodwill And Intangible Assets [Line Items]
Discount rate	45.00%
Technology and Patents Purchased [Member]
Goodwill And Intangible Assets [Line Items]
Weighted average remaining useful life			8 years 7 months 6 days	9 years 3 months 18 days
Developed Technology [Member]
Goodwill And Intangible Assets [Line Items]
Weighted average remaining useful life			4 years	4 years 9 months 18 days
Safe Stitch Medical Inc [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill			$ 93,800,000
Senhance Surgical Robotic System Acquisition [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill			$ 38,300,000
Intellectual property	$ 48,500,000
Senhance Surgical Robotic System Acquisition [Member] | In-Process Research and Development [Member]
Goodwill And Intangible Assets [Line Items]
In-process research and development	$ 17,100,000
Senhance Surgical Robotic System Acquisition [Member] | Technology and Patents Purchased [Member]
Goodwill And Intangible Assets [Line Items]
Acquisition price				$ 400,000

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Goodwill, In-Process Research and Development and Intellectual Property - Carrying Value of Goodwill and Change in Balance (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Beginning balance	$ 71,368
Foreign currency translation impact	(699)
Ending balance	$ 70,669

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Goodwill, In-Process Research and Development and Intellectual Property - Summary of Gross Intellectual Property, Accumulated Amortization, and Net Intellectual Property (Detail) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Developed Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 66,413	$ 66,413
Accumulated Amortization	(27,936)	(19,724)
Foreign currency translation impact	4,074	5,529
Net Carrying Amount	42,551	52,218
Technology and Patents Purchased [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	400	400
Accumulated Amortization	(62)	(30)
Foreign currency translation impact	36	50
Net Carrying Amount	374	420
Intellectual Property [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	66,813	66,813
Accumulated Amortization	(27,998)	(19,754)
Foreign currency translation impact	4,110	5,579
Net Carrying Amount	$ 42,925	$ 52,638

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Income Taxes - Additional Information (Detail) - USD ($)		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017
Income Tax Contingency [Line Items]
Estimates annual effective tax rate		5.00%
Deferred tax benefit		$ 2,572,000	$ 2,320,000
Effective tax rate		4.40%	3.30%
Unrecognized tax benefits that would affect effective tax rate	$ 0	$ 0
Accounting for the 2017 tax cuts and jobs act was complete	false
Foreign Tax Authority [Member] | TransEnterix Italia [Member]
Income Tax Contingency [Line Items]
Net deferred tax asset	$ 0	0
Valuation allowance	$ 0	$ 0

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Accrued Expenses - Schedule of Accrued Expenses (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accrued Liabilities Current [Abstract]
Compensation and benefits	$ 4,975	$ 4,533
Other	814	504
Deferred rent	437	595
Legal and professional fees	400	386
Consulting and other vendors	299	1,414
Taxes and other assessments	190	3,192
Interest	159	309
Royalties	158	41
Total	$ 7,432	$ 10,974

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Notes Payable - Additional Information (Detail) - USD ($)				1 Months Ended		9 Months Ended		12 Months Ended
	May 23, 2018	May 10, 2017	Sep. 26, 2014	May 31, 2018	May 31, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Apr. 28, 2017	Dec. 31, 2016	Jan. 17, 2012
Debt Instrument [Line Items]
Loss on Extinguishment of notes payable						$ (1,400,000)	$ (308,000)
Warrant expiration period			7 years
Issue of warrants to purchase shares of company's common stock									24,900,000
Notes Payable [Member]
Debt Instrument [Line Items]
Debt issuance costs paid to prior lenders and third parties						371,000
Debt issuance cost						280,000
Debt unamortized balance										$ 107,000
Notes Payable [Member] | Loss on Extinguishment of Notes Payable [Member]
Debt Instrument [Line Items]
Debt unamortized balance					$ 63,000
Hercules Loan Agreement [Member]
Debt Instrument [Line Items]
Debt discount liability, facility fee recorded as debt discount					287,000
Debt Instrument, redemption price amount				$ 680,000
Hercules Loan Agreement [Member] | Notes Payable [Member] | Interest Expense [Member]
Debt Instrument [Line Items]
Loss on Extinguishment of notes payable						$ (1,400,000)
Hercules Loan Agreement [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Note issuance date						May 23, 2018
Term loans aggregate principal amount	$ 40,000,000
Repayment of term loans period	18 months
Debt instrument amortization schedule	18 months
Debt instrument repayment term						The Company is entitled to make interest-only payments until December 1, 2020, and at the end the interest-only period, the Company will be 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.
Interest only payment date						Dec. 01, 2020
Maturity date of the term loans						Jun. 01, 2022
Debt discount liability, facility fee recorded as debt discount	$ 400,000
Prepayment fee percentage	6.95%
Term loans payment terms						In addition, the Company is 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 occurs 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 is required to pay a final fee of 6.95% of the aggregate principal amount of term loans funded. The final payment fee is accreted to interest expense over the life of the term loan and included within notes payable on the consolidated balance sheet.
Percentage outstanding principal balance of term loans required to be maintained	120.00%
Percentage of maintained cash and investment property in accounts of aggregate cash of parent and subsidiaries	80.00%
Amount of investment to any future equity offering	$ 2,000,000
Hercules Loan Agreement [Member] | Term Loan [Member] | Fixed Rate and Prime Rate [Member]
Debt Instrument [Line Items]
Term loans interest rate	5.00%
Hercules Loan Agreement [Member] | Term Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Term loans fixed interest rate	9.55%
Hercules Loan Agreement [Member] | Term Loan [Member] | First Year After Initial Funding Date [Member]
Debt Instrument [Line Items]
Prepayment fee percentage	3.00%
Hercules Loan Agreement [Member] | Term Loan [Member] | Second Year After Initial Funding Date [Member]
Debt Instrument [Line Items]
Prepayment fee percentage	2.00%
Hercules Loan Agreement [Member] | Term Loan [Member] | Second Year After Initial Funding Date And Thereafter [Member]
Debt Instrument [Line Items]
Prepayment fee percentage	1.00%
Hercules Loan Agreement [Member] | Term Loan [Member] | First Tranche [Member]
Debt Instrument [Line Items]
Term loans aggregate principal amount	$ 20,000,000
Hercules Loan Agreement [Member] | Term Loan [Member] | Second Tranche [Member]
Debt Instrument [Line Items]
Term loans aggregate principal amount	10,000,000
Hercules Loan Agreement [Member] | Term Loan [Member] | Third Tranche [Member]
Debt Instrument [Line Items]
Term loans aggregate principal amount	$ 10,000,000
Term loans fixed interest rate	9.20%
Loan and Security Agreement [Member]
Debt Instrument [Line Items]
Debt discount liability, facility fee recorded as debt discount					255,000
Debt Instrument, redemption price amount					$ 1,300,000
Issue of warrants to purchase shares of company's common stock											430,815
Loan and Security Agreement [Member] | Notes Payable [Member] | Interest Expense [Member]
Debt Instrument [Line Items]
Loss on Extinguishment of notes payable								$ (308,000)
Loan and Security Agreement [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Debt issuance costs recorded as debt discount		$ 1,200,000
Warrant expiration period		5 years
Loan and Security Agreement [Member] | Term Loan [Member] | Innovatus Life Sciences Lending Fund I, LP [Member]
Debt Instrument [Line Items]
Note issuance date		May 10, 2017
Term loans aggregate principal amount		$ 17,000,000
Repayment of term loans period		2 years
Debt instrument amortization schedule		24 months
Maturity date of the term loans						May 10, 2021
Term loans fixed interest rate		11.00%
Term loans fixed interest rate, paid in-kind percentage		2.50%
Interest only payment period		24 months
Loan and Security Agreement [Member] | Term Loan [Member] | First Tranche [Member]
Debt Instrument [Line Items]
Debt discount liability, facility fee recorded as debt discount		$ 170,000
Warrants, exercise price		$ 1.00
Estimated fair value of warrants		$ 300,000
Unamortized debt discount						$ 0		$ 1,000,000
Loan and Security Agreement [Member] | Term Loan [Member] | First Tranche [Member] | Innovatus Life Sciences Lending Fund I, LP [Member]
Debt Instrument [Line Items]
Term loans aggregate principal amount		$ 14,000,000
Loan and Security Agreement [Member] | Term Loan [Member] | First Tranche [Member] | Maximum [Member]
Debt Instrument [Line Items]
Issue of warrants to purchase shares of company's common stock		1,244,746

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Warrants - Summary of Change in Warrant (Detail) - Warrants Not Settleable in Cash [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Class of Warrant or Right [Line Items]
Number of Warrants, Outstanding, Beginning balance	13,162,668
Number of Warrants, Exercised	(8,562,631)
Number of Warrants, Cancelled	(95,600)
Number of Warrants, Outstanding, Ending balance	4,504,437	13,162,668
Weighted Average Exercise Price, Outstanding, Beginning balance	$ 1.08
Weighted Average Exercise Price, Exercised	1.09
Weighted Average Exercise Price, Cancelled	1.65
Weighted Average Exercise Price, Outstanding, Ending balance	$ 1.03	$ 1.08
Weighted Average Remaining Contractual Life, Outstanding	4 years	4 years 6 months
Weighted Average Grant Date Fair Value, Outstanding, Beginning balance	$ 0.39
Weighted Average Grant Date Fair Value, Outstanding, Ending balance	$ 0.26	$ 0.39

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Warrants - Additional Information (Detail) - shares		9 Months Ended
	Sep. 26, 2014	Sep. 30, 2018	Apr. 28, 2017	Jan. 17, 2012
Class of Warrant or Right [Line Items]
Service agreement termination description		In February 2018, the Company terminated its relationship with a vendor who had been issued warrants to acquire 950,000 shares of Common Stock (the “Service Warrants”) with staggered vesting requirements. As part of the termination agreement, the Company accelerated the full vesting of the Service Warrants.
Issue of warrants to purchase shares of company's common stock			24,900,000
Warrant expiration period	7 years
Loan and Security Agreement [Member]
Class of Warrant or Right [Line Items]
Issue of warrants to purchase shares of company's common stock				430,815

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Purchase Agreement, Controlled Equity Offering and Public Offering of Common Stock - Additional Information (Detail) - USD ($)			4 Months Ended	12 Months Ended
	Aug. 31, 2017	Apr. 28, 2017	Apr. 27, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 16, 2016
Stockholders Equity Common Stock [Line Items]
Warrants to purchase common shares		24,900,000
Offering price		$ 1.00
Gross proceeds from public offering		$ 24,900,000
Net proceeds from public offering		$ 23,200,000
Warrants exercised		0
Lincoln Park Capital Fund, LLC [Member]
Stockholders Equity Common Stock [Line Items]
Right to sell common stock						25,000,000
Stock issued, shares				3,972,741	300,000
Gross proceeds				$ 5,304,000	$ 412,500
Proceeds from issuance of common stock, net of issuance costs				$ 5,304,000	$ 392,500
Stifel, Nicolaus & Company, Incorporated [Member]
Stockholders Equity Common Stock [Line Items]
Percentage of commission paid	3.00%
Stifel, Nicolaus & Company, Incorporated [Member] | Maximum [Member]
Stockholders Equity Common Stock [Line Items]
Sale of common stock in an at-the-market offering	$ 50,000,000
Commitment Shares [Member] | Lincoln Park Capital Fund, LLC [Member]
Stockholders Equity Common Stock [Line Items]
Stock issued, shares			345,421
Common Stock [Member]
Stockholders Equity Common Stock [Line Items]
Number of common stock or warrants in each unit		1
Common Stock [Member] | Series A Warrant [Member]
Stockholders Equity Common Stock [Line Items]
Number of common stock or warrants in each unit		1
Common Stock [Member] | Series B Warrant [Member]
Stockholders Equity Common Stock [Line Items]
Number of common stock or warrants in each unit		0.75

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Purchase Agreement, Controlled Equity Offering and Public Offering of Common Stock - Schedule of Total Sales under 2017 Sales Agreement (Detail) - Stifel, Nicolaus & Company, Incorporated [Member] - 2017 Sales Agreement [Member] $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares shares
Sale And Issue Of Shares Under Agreement [Line Items]
Total shares of common stock sold | shares	15,998,500
Average price per share | $ / shares	$ 3.13
Gross proceeds	$ 50,000
Commissions earned by Stifel	1,500
Other issuance costs	$ 97

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Basic and Diluted Net Loss per Share - Additional Information (Detail) - shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Basic And Diluted Earning Per Share [Abstract]
Adjustment to weighted average outstanding common shares	0	0

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Related Person Transactions - Additional Information (Detail) $ / shares in Units, € in Millions				9 Months Ended		12 Months Ended
	Jan. 04, 2017 EUR (€) shares	Dec. 30, 2016 EUR (€) shares	Sep. 21, 2015 shares	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)	Jan. 04, 2017 $ / shares
Related Party Transaction [Line Items]
Fair value of contingent consideration				$ 12,104,000		$ 12,418,000
Senhance Surgical Robotic System Acquisition [Member]
Related Party Transaction [Line Items]
Reduction of contingent consideration				100,000	$ 1,200,000
Common shares issued | shares			15,543,413
Fair value of contingent consideration				12,100,000		$ 12,400,000
Senhance Surgical Robotic System Acquisition [Member] | Second Tranche [Member]
Related Party Transaction [Line Items]
Reduction of contingent consideration | €		€ (5.0)
Common shares issued | shares		3,722,685
Aggregate fair market value of common stock | €		€ 5.0
Fair value of contingent consideration | €	€ 5.0
Share price | $ / shares							$ 1.404
Number of consecutive trading days	10 days
Sofar [Member]
Related Party Transaction [Line Items]
Expenses for administrative services with related party				$ 0	$ 52,000
Service agreement termination period				2017
Sofar [Member] | Senhance Surgical Robotic System Acquisition [Member] | Second Tranche [Member]
Related Party Transaction [Line Items]
Common shares issued | shares	3,722,685
Sofar [Member] | Common Stock [Member]
Related Party Transaction [Line Items]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners				9.00%	12.00%
1Med S.A [Member] | Service Supply Agreement [Member]
Related Party Transaction [Line Items]
Expenses incurred under related party transactions				$ 62,000

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Commitments and Contingencies - Additional Information (Detail) € in Millions				9 Months Ended		12 Months Ended
	Jan. 04, 2017 EUR (€)	Dec. 30, 2016 EUR (€) shares	Sep. 21, 2015 shares	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
Operating Leased Assets [Line Items]
Fair value of contingent consideration				$ 12,104,000		$ 12,418,000
Liability or related charge recorded for legal contingencies				0		0
Senhance Surgical Robotic System Acquisition [Member]
Operating Leased Assets [Line Items]
Contingent consideration related to acquisition				100,000	$ 1,200,000
Common shares issued | shares			15,543,413
Fair value of contingent consideration				$ 12,100,000		$ 12,400,000
Senhance Surgical Robotic System Acquisition [Member] | Second Tranche [Member]
Operating Leased Assets [Line Items]
Contingent consideration related to acquisition | €		€ (5.0)
Common shares issued | shares		3,722,685
Aggregate fair market value of common stock | €		€ 5.0
Fair value of contingent consideration | €	€ 5.0

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Subsequent Events - Additional Information (Detail) - USD ($) shares in Thousands	Oct. 31, 2018	Oct. 23, 2018	May 23, 2018
Hercules Loan Agreement [Member] | Term Loan [Member]
Subsequent Event [Line Items]
Term loans aggregate principal amount			$ 40,000,000
Hercules Loan Agreement [Member] | Term Loan [Member] | Second Tranche [Member]
Subsequent Event [Line Items]
Term loans aggregate principal amount			$ 10,000,000
Subsequent Event [Member] | Hercules Loan Agreement [Member] | Term Loan [Member] | Second Tranche [Member]
Subsequent Event [Line Items]
Term loans aggregate principal amount		$ 10,000,000
Subsequent Event [Member] | MST Purchase Agreement [Member] | Medical Surgery Technologies Ltd. [Member] | First Tranche [Member]
Subsequent Event [Line Items]
Cash consideration	$ 5,800,000
Common shares issued	3,150
Subsequent Event [Member] | MST Purchase Agreement [Member] | Medical Surgery Technologies Ltd. [Member] | Second Tranche [Member]
Subsequent Event [Line Items]
Additional consideration payable in cash, stock or cash and stock	$ 6,600,000