Warrants

12 Months Ended

Dec. 31, 2019

Warrants and Rights Note Disclosure [Abstract]

On March 22, 2013, SafeStitch entered into a stock purchase agreement with approximately 17 investors (the “2013 PIPE Investors”) pursuant to which the 2013 PIPE Investors purchased an aggregate of approximately 186,092 shares of common stock at a price of $16.25 per share for aggregate consideration of approximately $3.0 million. Included in this private placement was the issuance of warrants to purchase approximately 93,046 common shares, representing one warrant for every two common shares purchased, with an exercise price of $21.45 per share and five years expiration. Among the 2013 PIPE Investors purchasing shares were related parties who purchased 98,462 shares and received 49,231 warrants. There were approximately 92,277 warrants outstanding that were assumed as of the Merger. During the years ended December 31, 2018 and 2017, 61,538 and 18,462, respectively of these warrants were exercised. During the year ended December 31, 2018, the remaining 7,354 warrants expired.

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

On September 26, 2014, the Company entered into an amendment to the SVB Loan Agreement with the Prior Lenders. In connection with the first tranche borrowings under such amendment, the Company issued 2,948 common stock warrants to the Prior Lenders to purchase shares of the Company’s common stock, with an exercise price of $52.20 per share. The warrants expire seven years from their respective issue date. The Company concluded that the warrants are considered equity instruments. The warrants were recognized at the relative fair value on the issuance date as a debt discount and were amortized using the effective interest method from issuance to the maturity of the term loans. None of these warrants were exercised during the years ended December 31, 2019. During the year ended December 31, 2018, 2,145 of these warrants were exercised in a cashless transaction for 660 shares of common stock.

On August 14, 2015, in connection with an amendment to the SVB Loan Agreement and first tranche borrowings thereunder, the Company issued 8,684 common stock warrants to the Prior Lenders to purchase shares of the Company’s common stock, with an exercise price of $40.30 per share. The warrants expire seven years from their respective issue date. The Company concluded that the warrants are considered equity instruments. The warrants were recognized at the relative fair value on the issuance date as a debt discount and were amortized using the effective interest method from issuance to the maturity of the note. None of these warrants were exercised during the years ended December 31, 2019. During the year ended December 31, 2018, 5,211 of these warrants were exercised in a cashless transaction for 2,426 shares of common stock.

On April 28, 2017, the Company sold 24.9 million Units, each consisting of approximately 0.077 shares of the Company's Common Stock, a Series A Warrant to purchase approximately 0.077 shares of Common Stock with an exercise price of $13.00 per share, and a Series B Warrant to purchase approximately 0.058 shares of Common Stock with an exercise price of $13.00 per share at an offering price of $1.00 per Unit. 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. As such, all of the Series A Warrants were exercised prior to the expiration date. 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 exercise prices and the number of shares issuable upon exercise of each of the 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 contain provisions, often referred to as “down-round protection,” that leads to adjustment of the exercise price and number of underlying warrant shares if the Company issues securities, including its common stock or convertible securities or debt securities, in the future at sale prices below the then-current exercise price. As a result of this adjustment feature and after giving effect to the Company’s reverse stock split at a ratio of one-for-thirteen shares effective December 11, 2019, or the Reverse Stock Split, the exercise price of all outstanding Series B Warrants has been adjusted to $1.39 per share and the number of shares of common stock reserved for and issuable upon the exercise of outstanding Series B Warrants has been adjusted to 1,963,451 underlying warrant shares as of December 31, 2019.

The exercisability of the Series B Warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% of the Common Stock. If, at any time Series B Warrants are outstanding, any fundamental transaction occurs, as described in the Series B Warrants and generally including any consolidation or merger into another corporation, the consummation of a transaction whereby another entity acquires more than 50% of the Company’s outstanding voting stock, or the sale of all or substantially all of its assets, the successor entity must assume in writing all of the obligations to the Series B Warrant holders. Additionally, in the event of a fundamental transaction, each Series B Warrant holder will have the right to require the Company, or its successor, to repurchase the Series B Warrants for an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such Series B Warrants. During the years ended December 31, 2018 and 2017, 542,478 and 684,131, respectively, Series B Warrants were exercised. There were no Series B Warrants exercised during the year ended December 31, 2019.

On May 10, 2017, in connection with the entry into the Innovatus Loan Agreement, the Company issued warrants to Innovatus to purchase shares of the Company’s common stock. The warrants are issued on the funding date of each tranche and will expire five (5) years from such issue date. The warrants issued in connection with funding of the first tranche will entitle Innovatus to purchase up to 95,750 shares of the Company’s common stock at an exercise price of $13.00 per share. None of these warrants were exercised as of December 31, 2019.

On September 12, 2017, the Company entered into a service agreement with a third party vendor. In connection with the service agreement, the Company issued 73,076 common stock warrants (“Service Warrants”) to purchase shares of the Company’s common stock, with an exercise price of $13.00 per share. The Service Warrants vest as follow: (a) twenty-five percent (25%) on the date of execution of the services agreement; (b) fifty percent (50%) upon completion of hiring the sales team; and (c) the remaining twenty-five percent (25%) upon achieving cumulative product revenue of $15.0 million. The Service Warrants expire ten years from their issue date. The Company concluded that the Service Warrants are considered equity instruments. The fair value of the Service Warrants on the issuance date was determined using a Black-Scholes Merton model. The fair value of the remaining Service Warrants was updated each reporting period and the expense was recorded over the service period. The initial expense of $0.6 million and additional expense of $0.3 million was recognized during the year ended December 31, 2017. In February 2018, the Company terminated its relationship with the vendor and accelerated the full vesting of the Service Warrants in accordance with the service agreement. The remaining expense of $0.3 million was recognized during the year ended December 31, 2018. During the year ended December 31, 2019 and 2018, 15,385 and 50,000 of these warrants were exercised, respectively.



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

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