|
|
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
Delaware
|
|
11-2962080
|
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
Large accelerated filer
|
X
|
|
Accelerated filer
|
☐
|
|
Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☐
|
|
|
|
|
Emerging Growth Company
|
☐
|
|
Title of each class
|
|
Trading symbol
|
|
Name of each exchange on which registered
|
|
Common Stock
$0.001 par value per share |
|
TRXC
|
|
NYSE American
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||
|
|
June 30,
|
June 30,
|
|||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Revenue
|
$
|
3,639
|
|
|
$
|
6,389
|
|
|
$
|
5,820
|
|
|
$
|
11,156
|
|
|
Cost of revenue
|
3,936
|
|
|
3,732
|
|
|
6,403
|
|
|
6,287
|
|
||||
|
Gross (loss) profit
|
(297
|
)
|
|
2,657
|
|
|
(583
|
)
|
|
4,869
|
|
||||
|
Operating Expenses (Income)
|
|
|
|
|
|
|
|
||||||||
|
Research and development
|
6,295
|
|
|
5,281
|
|
|
11,950
|
|
|
10,546
|
|
||||
|
Sales and marketing
|
7,868
|
|
|
6,046
|
|
|
15,542
|
|
|
12,016
|
|
||||
|
General and administrative
|
4,489
|
|
|
3,627
|
|
|
9,049
|
|
|
6,303
|
|
||||
|
Amortization of intangible assets
|
2,585
|
|
|
2,743
|
|
|
5,196
|
|
|
5,570
|
|
||||
|
Change in fair value of contingent consideration
|
960
|
|
|
812
|
|
|
1,958
|
|
|
1,439
|
|
||||
|
Acquisition related costs
|
—
|
|
|
—
|
|
|
45
|
|
|
—
|
|
||||
|
Loss (gain) from sale of SurgiBot assets, net
|
—
|
|
|
37
|
|
|
97
|
|
|
(11,959
|
)
|
||||
|
Total Operating Expenses
|
22,197
|
|
|
18,546
|
|
|
43,837
|
|
|
23,915
|
|
||||
|
Operating Loss
|
(22,494
|
)
|
|
(15,889
|
)
|
|
(44,420
|
)
|
|
(19,046
|
)
|
||||
|
Other Income (Expense)
|
|
|
|
|
|
|
|
||||||||
|
Change in fair value of warrant liabilities
|
2,528
|
|
|
(17,507
|
)
|
|
2,422
|
|
|
(15,678
|
)
|
||||
|
Interest income
|
178
|
|
|
320
|
|
|
496
|
|
|
590
|
|
||||
|
Interest expense
|
(1,061
|
)
|
|
(2,056
|
)
|
|
(2,177
|
)
|
|
(2,712
|
)
|
||||
|
Other (expense) income
|
(191
|
)
|
|
1
|
|
|
(496
|
)
|
|
(57
|
)
|
||||
|
Total Other Income (Expense), net
|
1,454
|
|
|
(19,242
|
)
|
|
245
|
|
|
(17,857
|
)
|
||||
|
Loss before income taxes
|
(21,040
|
)
|
|
(35,131
|
)
|
|
(44,175
|
)
|
|
(36,903
|
)
|
||||
|
Income tax benefit
|
869
|
|
|
883
|
|
|
1,479
|
|
|
1,773
|
|
||||
|
Net loss
|
$
|
(20,171
|
)
|
|
$
|
(34,248
|
)
|
|
$
|
(42,696
|
)
|
|
$
|
(35,130
|
)
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
||||||||
|
Foreign currency translation gain (loss)
|
1,240
|
|
|
(4,398
|
)
|
|
(709
|
)
|
|
(2,090
|
)
|
||||
|
Comprehensive loss
|
$
|
(18,931
|
)
|
|
$
|
(38,646
|
)
|
|
$
|
(43,405
|
)
|
|
$
|
(37,220
|
)
|
|
Net loss per common share:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
(0.09
|
)
|
|
(0.17
|
)
|
|
(0.20
|
)
|
|
(0.17
|
)
|
||||
|
Diluted
|
(0.10
|
)
|
|
(0.17
|
)
|
|
(0.21
|
)
|
|
(0.17
|
)
|
||||
|
Weighted average number of shares used in computing net loss per common share:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
217,471
|
|
|
204,504
|
|
|
217,135
|
|
|
202,214
|
|
||||
|
Diluted
|
218,579
|
|
|
204,504
|
|
|
218,579
|
|
|
202,214
|
|
||||
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
(unaudited)
|
|
|
||||
|
Assets
|
|
|
|
||||
|
Current Assets
|
|
|
|
||||
|
Cash and cash equivalents
|
$
|
23,302
|
|
|
$
|
21,061
|
|
|
Short-term investments
|
9,973
|
|
|
51,790
|
|||
|
Accounts receivable, net
|
5,669
|
|
|
8,560
|
|||
|
Inventories
|
20,091
|
|
|
10,941
|
|||
|
Interest receivable
|
30
|
|
|
26
|
|||
|
Other current assets
|
10,240
|
|
|
9,205
|
|||
|
Total Current Assets
|
69,305
|
|
|
101,583
|
|||
|
Restricted cash
|
712
|
|
|
590
|
|||
|
Property and equipment, net
|
5,782
|
|
|
6,337
|
|||
|
Intellectual property, net
|
34,190
|
|
|
39,716
|
|||
|
In-process research and development
|
10,667
|
|
|
10,747
|
|||
|
Goodwill
|
79,904
|
|
|
80,131
|
|||
|
Other long term assets
|
2,818
|
|
|
203
|
|||
|
Total Assets
|
$
|
203,378
|
|
|
$
|
239,307
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
|
Current Liabilities
|
|
|
|
||||
|
Accounts payable
|
$
|
7,039
|
|
|
$
|
4,433
|
|
|
Accrued expenses
|
8,182
|
|
9,619
|
||||
|
Deferred revenue – current portion
|
897
|
|
|
1,733
|
|||
|
Contingent consideration – current portion
|
74
|
|
|
72
|
|||
|
Deferred consideration - MST Acquisition
|
6,310
|
|
|
5,962
|
|||
|
Total Current Liabilities
|
22,502
|
|
|
21,819
|
|||
|
Long Term Liabilities
|
|
|
|
||||
|
Deferred revenue – less current portion
|
68
|
|
|
109
|
|||
|
Contingent consideration – less current portion
|
12,521
|
|
|
10,565
|
|||
|
Notes payable – net of debt discount
|
29,528
|
|
|
28,937
|
|||
|
Warrant liabilities
|
2,214
|
|
|
4,636
|
|||
|
Net deferred tax liabilities
|
3,164
|
|
|
4,720
|
|||
|
Other long term liabilities
|
1,894
|
|
|
—
|
|
||
|
Total Liabilities
|
71,891
|
|
|
70,786
|
|||
|
Commitments and Contingencies (Note 17)
|
|
|
|
||||
|
Stockholders’ Equity
|
|
|
|
||||
|
Common stock $0.001 par value, 750,000,000 shares authorized at
June 30, 2019 and December 31, 2018; 217,625,492 and 216,345,984 shares
issued and outstanding at June 30, 2019 and December 31, 2018, respectively
|
217
|
|
|
216
|
|||
|
Additional paid-in capital
|
682,736
|
|
|
676,373
|
|||
|
Accumulated deficit
|
(552,095
|
)
|
|
(509,406)
|
|||
|
Accumulated other comprehensive income
|
629
|
|
|
1,338
|
|||
|
Total Stockholders’ Equity
|
131,487
|
|
|
168,521
|
|||
|
Total Liabilities and Stockholders’ Equity
|
$
|
203,378
|
|
|
$
|
239,307
|
|
|
TransEnterix, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|||||||
|
|
Six Months Ended
|
||||||
|
|
June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Operating Activities
|
|
|
|
||||
|
Net loss
|
$
|
(42,696
|
)
|
|
$
|
(35,130
|
)
|
|
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
|
|
|
|
||||
|
Loss (gain) from sale of SurgiBot assets, net
|
97
|
|
|
(11,959
|
)
|
||
|
Depreciation
|
1,126
|
|
|
1,277
|
|
||
|
Amortization of intangible assets
|
5,196
|
|
|
5,570
|
|
||
|
Amortization of debt discount and debt issuance costs
|
622
|
|
|
495
|
|
||
|
Amortization of short-term investment discount
|
(300
|
)
|
|
—
|
|
||
|
Interest expense on deferred consideration - MST acquisition
|
387
|
|
|
—
|
|
||
|
Stock-based compensation
|
6,336
|
|
|
4,204
|
|
||
|
Deferred tax benefit
|
(1,479
|
)
|
|
(1,799
|
)
|
||
|
Write down of inventory
|
761
|
|
—
|
|
|||
|
Change in fair value of warrant liabilities
|
(2,422
|
)
|
|
15,678
|
|
||
|
Change in fair value of contingent consideration
|
1,958
|
|
|
1,439
|
|
||
|
Loss on extinguishment of debt
|
—
|
|
|
1,400
|
|
||
|
Changes in operating assets and liabilities:
|
|
|
|
||||
|
Accounts receivable
|
2,808
|
|
|
(762
|
)
|
||
|
Interest receivable
|
(4
|
)
|
|
(24
|
)
|
||
|
Inventories
|
(10,301
|
)
|
|
(1,560
|
)
|
||
|
Other current and long term assets
|
(3,689
|
)
|
|
1,905
|
|
||
|
Accounts payable
|
2,499
|
|
|
404
|
|
||
|
Accrued expenses
|
(1,454
|
)
|
|
(359
|
)
|
||
|
Deferred revenue
|
(862
|
)
|
|
31
|
|
||
|
Other long term liabilities
|
1,879
|
|
|
—
|
|
||
|
Net cash and cash equivalents used in operating activities
|
$
|
(39,538
|
)
|
|
$
|
(19,190
|
)
|
|
Investing Activities
|
|
|
|
||||
|
Purchase of short-term investments
|
(12,883
|
)
|
|
—
|
|
||
|
Proceeds from maturities of short-term investments
|
55,000
|
|
|
—
|
|
||
|
Proceeds related to sale of SurgiBot assets, net
|
—
|
|
|
4,496
|
|
||
|
Purchase of property and equipment
|
(189
|
)
|
|
(358
|
)
|
||
|
Proceeds from sale of property and equipment
|
—
|
|
|
32
|
|
||
|
Net cash and cash equivalents provided by investing activities
|
41,928
|
|
|
4,170
|
|
||
|
Financing Activities
|
|
|
|
||||
|
Payment of note payable
|
—
|
|
|
(15,305
|
)
|
||
|
Proceeds from issuance of debt and warrants, net of issuance costs
|
(30
|
)
|
|
18,870
|
|
||
|
Payment of contingent consideration
|
—
|
|
|
(395
|
)
|
||
|
Proceeds from issuance of common stock and warrants, net of issuance costs
|
—
|
|
|
2
|
|
||
|
Taxes paid related to net share settlement of vesting of restricted stock units
|
(499
|
)
|
|
—
|
|
||
|
Proceeds from issuance of common stock related to sale of SurgiBot assets
|
—
|
|
|
3,000
|
|
||
|
Proceeds from exercise of stock options and warrants
|
534
|
|
|
9,813
|
|
||
|
Net cash and cash equivalents provided by financing activities
|
5
|
|
|
15,985
|
|
||
|
Effect of exchange rate changes on cash and cash equivalents
|
(32
|
)
|
|
(78
|
)
|
||
|
Net increase in cash, cash equivalents and restricted cash
|
2,363
|
|
|
887
|
|
||
|
Cash, cash equivalents and restricted cash, beginning of period
|
21,651
|
|
|
97,606
|
|
||
|
Cash, cash equivalents and restricted cash, end of period
|
$
|
24,014
|
|
|
$
|
98,493
|
|
|
|
|
|
|
||||
|
TransEnterix, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|||||||
|
|
|
|
|
||||
|
Supplemental Disclosure for Cash Flow Information
|
|
|
|
||||
|
Interest paid
|
$
|
1,528
|
|
|
$
|
599
|
|
|
Supplemental Schedule of Noncash Investing and Financing Activities
|
|
|
|
||||
|
Transfer of inventories to property and equipment
|
$
|
415
|
|
|
$
|
1,055
|
|
|
Reclass of warrant liability to common stock and additional paid-in capital
|
$
|
—
|
|
|
$
|
7,060
|
|
|
1.
|
Organization and Capitalization
|
|
2.
|
Summary of Significant Accounting Policies
|
|
Machinery, manufacturing and
demonstration equipment
|
3-5 years
|
|
Computer equipment
|
3 years
|
|
Furniture
|
5 years
|
|
Leasehold improvements
|
Lesser of lease term or 3 to 10 years
|
|
•
|
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 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.
|
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||
|
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
|
|
(in thousands)
(unaudited)
|
||||||||||||
|
U.S.
|
|
|
|
|
|
||||||||
|
Systems
|
$
|
—
|
|
$
|
875
|
|
|
$
|
—
|
|
$
|
875
|
|
|
Instruments and accessories
|
25
|
|
409
|
|
|
25
|
|
409
|
|
||||
|
Services
|
127
|
|
28
|
|
|
260
|
|
49
|
|
||||
|
Total U.S. revenue
|
152
|
|
1,312
|
|
|
285
|
|
1,333
|
|
||||
|
Outside of U.S. ("OUS")
|
|
|
|
|
|
||||||||
|
Systems
|
2,737
|
|
3,782
|
|
|
4,024
|
|
7,236
|
|
||||
|
Instruments and accessories
|
535
|
|
1,101
|
|
|
1,081
|
|
2,212
|
|
||||
|
Services
|
215
|
|
194
|
|
|
430
|
|
375
|
|
||||
|
Total OUS revenue
|
3,487
|
|
5,077
|
|
|
5,535
|
|
9,823
|
|
||||
|
Total
|
|
|
|
|
|
||||||||
|
Systems
|
2,737
|
|
4,657
|
|
|
4,024
|
|
8,111
|
|
||||
|
Instruments and accessories
|
560
|
|
1,510
|
|
|
1,106
|
|
2,621
|
|
||||
|
Services
|
342
|
|
222
|
|
|
690
|
|
424
|
|
||||
|
Total revenue
|
$
|
3,639
|
|
$
|
6,389
|
|
|
$
|
5,820
|
|
$
|
11,156
|
|
|
|
Balance at
December 31, 2018 |
|
Adjustments Due
to ASC 842 |
|
Balance at
January 1, 2019 |
||||||
|
|
(unaudited)
(In thousands) |
||||||||||
|
Assets
|
|
|
|
|
|
||||||
|
Other long term assets
|
$
|
—
|
|
|
$
|
1,751
|
|
|
$
|
1,751
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
||||||
|
Accrued expenses
|
—
|
|
|
507
|
|
|
507
|
|
|||
|
Other long term liabilities
|
$
|
—
|
|
|
$
|
1,244
|
|
|
$
|
1,244
|
|
|
July 1, 2019 to December 31, 2019
|
662
|
|
|
|
January 1, 2020 to December 31, 2020
|
1,317
|
|
|
|
January 1, 2021 to December 31, 2021
|
669
|
|
|
|
January 1, 2022 to December 31, 2022
|
404
|
|
|
|
January 1, 2023 to December 31, 2023
|
194
|
|
|
|
January 1, 2024 to December 31, 2024
|
33
|
|
|
|
Thereafter
|
—
|
|
|
|
Total minimum lease payments
|
3,279
|
|
|
|
Less: Amount of lease payments representing interest
|
(352
|
)
|
|
|
Present value of future minimum lease payments
|
2,927
|
|
|
|
Stock consideration
|
$
|
8,300
|
|
|
Cash consideration
|
5,800
|
|
|
|
Present value of deferred consideration
|
5,900
|
|
|
|
Other consideration
|
314
|
|
|
|
Total consideration
|
$
|
20,314
|
|
|
Property and equipment
|
$
|
43
|
|
|
In-process research and development
|
10,633
|
|
|
|
Goodwill
|
9,638
|
|
|
|
Net assets acquired
|
$
|
20,314
|
|
|
4.
|
Cash, Cash Equivalents, and Restricted Cash
|
|
5.
|
Fair Value
|
|
|
|
June 30, 2019
|
||||||||||||||
|
|
|
(In thousands)
(unaudited)
|
||||||||||||||
|
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
|
|
$
|
23,302
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23,302
|
|
|
Restricted cash
|
|
712
|
|
|
—
|
|
|
—
|
|
|
712
|
|
||||
|
Total Assets measured at fair value
|
|
$
|
24,014
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,014
|
|
|
Liabilities measured at fair value
|
|
|
|
|
|
|
|
|
||||||||
|
Contingent consideration
|
|
—
|
|
|
—
|
|
|
12,595
|
|
|
12,595
|
|
||||
|
Warrant liabilities
|
|
—
|
|
|
—
|
|
|
2,214
|
|
|
2,214
|
|
||||
|
Total liabilities measured at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,809
|
|
|
$
|
14,809
|
|
|
Description
|
|
December 31, 2018
|
||||||||||||||
|
|
(In thousands)
|
|||||||||||||||
|
|
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
|
|
$
|
21,061
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,061
|
|
|
Restricted cash
|
|
590
|
|
—
|
|
|
—
|
|
|
590
|
||||||
|
Total Assets measured at fair value
|
|
$
|
21,651
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,651
|
|
|
Liabilities measured at fair value
|
|
|
|
|
|
|
|
|
||||||||
|
Contingent consideration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,637
|
|
|
$
|
10,637
|
|
|
Warrant liabilities
|
|
—
|
|
|
—
|
|
|
4,636
|
|
|
4,636
|
|
||||
|
Total liabilities measured at fair value
|
|
—
|
|
|
—
|
|
|
15,273
|
|
|
15,273
|
|
||||
|
Series B
|
|
June 30, 2019
|
|
December 31, 2018
|
|
April 28, 2017
(date of issuance)
|
|
Fair value
|
|
$2.2 milllion
|
|
$4.6 milllion
|
|
$6.2 milllion
|
|
Valuation methodology
|
|
Monte Carlo
|
|
Monte Carlo
|
|
Black-Scholes Merton
|
|
Term
|
|
2.8 years
|
|
3.3 years
|
|
5.0 years
|
|
Risk free rate
|
|
1.71%
|
|
2.47%
|
|
1.81%
|
|
Dividends
|
|
—
|
|
—
|
|
—
|
|
Volatility
|
|
82.34%
|
|
87.60%
|
|
73.14%
|
|
Share price
|
|
$1.36
|
|
$2.26
|
|
$0.65
|
|
Probability of additional financing
|
|
100% in 2019
|
|
100% in 2019
|
|
Not Applicable
|
|
|
Valuation
Methodology
|
|
Significant
Unobservable Input
|
|
Weighted Average
(range, if
applicable)
|
|
Contingent consideration
|
Probability weighted
income approach
|
|
Milestone dates
|
|
2019 to 2022
|
|
|
|
|
Discount rate
|
|
10% to 12%
|
|
|
Fair Value
Measurement at
Reporting Date
(Level 3)
|
||||||
|
|
(In thousands)
(unaudited)
|
||||||
|
|
Common stock
warrants
|
|
Contingent
consideration
|
||||
|
Balance at December 31, 2018
|
$
|
4,636
|
|
|
$
|
10,637
|
|
|
Change in fair value
|
(2,422
|
)
|
|
1,958
|
|
||
|
Balance at June 30, 2019
|
$
|
2,214
|
|
|
$
|
12,595
|
|
|
Current portion
|
—
|
|
|
74
|
|
||
|
Long-term portion
|
2,214
|
|
|
12,521
|
|
||
|
Balance at June 30, 2019
|
$
|
2,214
|
|
|
$
|
12,595
|
|
|
6.
|
Accounts Receivable, Net
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
(In thousands)
|
||||||
|
|
(unaudited)
|
|
|
||||
|
Gross accounts receivable
|
$
|
5,749
|
|
|
$
|
8,640
|
|
|
Allowance for uncollectible accounts
|
(80
|
)
|
|
(80
|
)
|
||
|
Total accounts receivable, net
|
$
|
5,669
|
|
|
$
|
8,560
|
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
(In thousands)
|
||||||
|
|
(unaudited)
|
|
|
||||
|
Finished goods
|
$
|
9,586
|
|
|
$
|
5,439
|
|
|
Raw materials
|
10,505
|
|
|
5,502
|
|
||
|
Total inventories
|
$
|
20,091
|
|
|
$
|
10,941
|
|
|
8.
|
Other Current Assets
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
(In thousands)
|
||||||
|
|
(unaudited)
|
|
|
||||
|
Advances to vendors
|
$
|
8,867
|
|
|
$
|
7,758
|
|
|
Prepaid expenses
|
1,354
|
|
|
1,438
|
|
||
|
Other receivables
|
19
|
|
|
9
|
|
||
|
Total
|
$
|
10,240
|
|
|
$
|
9,205
|
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
(In thousands)
|
||||||
|
|
(unaudited)
|
|
|
||||
|
Machinery, manufacturing and demonstration equipment
|
$
|
12,565
|
|
|
$
|
12,320
|
|
|
Computer equipment
|
2,297
|
|
|
2,260
|
|||
|
Furniture
|
638
|
|
|
639
|
|||
|
Leasehold improvements
|
2,287
|
|
|
2,280
|
|||
|
Total property and equipment
|
17,787
|
|
|
17,499
|
|||
|
Accumulated depreciation and amortization
|
(12,005
|
)
|
|
(11,162)
|
|||
|
Property and equipment, net
|
$
|
5,782
|
|
|
$
|
6,337
|
|
|
10.
|
Goodwill, In-Process Research and Development and Intellectual Property
|
|
|
Goodwill
|
|
|
|
(In thousands)
(unaudited)
|
|
|
Balance at December 31, 2018
|
$80,131
|
|
|
Foreign currency translation impact
|
(227
|
)
|
|
Balance at June 30, 2019
|
$79,904
|
|
|
|
In-Process
Research and
Development
|
||
|
|
(In thousands)
(unaudited)
|
||
|
Balance at December 31, 2018
|
$
|
10,747
|
|
|
Foreign currency translation impact
|
(80
|
)
|
|
|
Balance at June 30, 2019
|
$
|
10,667
|
|
|
|
June 30, 2019
|
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
|
(In thousands)
(unaudited)
|
|
|
(In thousands)
|
||||||||||||||||||||||||||||
|
|
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
|
|
|
$
|
(35,725
|
)
|
|
$
|
3,168
|
|
|
$
|
33,856
|
|
|
|
$
|
66,413
|
|
|
$
|
(30,550
|
)
|
|
$
|
3,495
|
|
|
$
|
39,358
|
|
|
Technology and patents purchased
|
400
|
|
|
(93
|
)
|
|
27
|
|
|
334
|
|
|
|
400
|
|
|
(72
|
)
|
|
30
|
|
|
358
|
|
||||||||
|
Total intellectual property
|
$
|
66,813
|
|
|
$
|
(35,818
|
)
|
|
$
|
3,195
|
|
|
$
|
34,190
|
|
|
|
$
|
66,813
|
|
|
$
|
(30,622
|
)
|
|
$
|
3,525
|
|
|
$
|
39,716
|
|
|
11.
|
Income Taxes
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
|
|
(In thousands)
|
||||||
|
|
(unaudited)
|
|
|
||||
|
Compensation and benefits
|
$
|
2,731
|
|
|
$
|
6,225
|
|
|
Consulting and other vendors
|
2,188
|
|
|
895
|
|||
|
Other
|
610
|
|
|
539
|
|||
|
Lease liability
|
1,033
|
|
|
—
|
|
||
|
Royalties
|
539
|
|
|
498
|
|||
|
Legal and professional fees
|
311
|
|
|
432
|
|||
|
Deferred rent
|
—
|
|
|
391
|
|||
|
Taxes and other assessments
|
519
|
|
|
383
|
|||
|
Interest
|
251
|
|
|
256
|
|||
|
Total
|
$
|
8,182
|
|
|
$
|
9,619
|
|
|
13.
|
Notes Payable
|
|
|
Number of
Warrants
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
|
Weighted
Average
Fair Value
|
||
|
Outstanding at December 31, 2018
|
4,329,437
|
|
|
1.03
|
|
3.7
|
|
0.26
|
|
|
Exercised
|
(200,000
|
)
|
|
1.00
|
|
8.2
|
|
—
|
|
|
Expired
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
Outstanding at June 30, 2019
|
4,129,437
|
|
|
1.03
|
|
3.0
|
|
0.22
|
|
|
15.
|
At-The-Market Offering
|
|
16.
|
Basic and Diluted Net Loss per Share
|
|
17.
|
Commitments and Contingencies
|
|
18.
|
Subsequent Events
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
(in millions)
|
|
|
|
||||
|
Net cash (used in) provided by
|
|
|
|
||||
|
Operating activities
|
$
|
(39.5
|
)
|
|
$
|
(19.2
|
)
|
|
Investing activities
|
41.9
|
|
|
4.2
|
|
||
|
Financing activities
|
—
|
|
|
16.0
|
|
||
|
Effect of exchange rate changes on cash and
cash equivalents
|
—
|
|
|
(0.1
|
)
|
||
|
Net increase in cash, cash
equivalents and restricted cash
|
$
|
2.4
|
|
|
$
|
0.9
|
|
|
•
|
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.
|
|
•
|
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
|
|
•
|
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.
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
|
Item 1
|
Legal Proceedings
|
|
Item 1A
|
Risk Factors.
|
|
Item 2
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
|
Item 3
|
Defaults Upon Senior Securities.
|
|
Item 4
|
Mine Safety Disclosures.
|
|
Item 5
|
Other Information.
|
|
Item 6.
|
EXHIBITS
|
|
Exhibit
No.
|
|
Description
|
|
10.1 * !
|
|
AutoLap System Sale Agreement between TransEnterix, Inc., and Great Belief International Limited, dated July 3, 2019.
|
|
|
|
|
|
10.2 *
|
|
Consent and Second Amendment to Loan and Security Agreement, dated and effective as of July 10, 2019, by and among TransEnterix, Inc., TransEnterix Surgical, Inc., TransEnterix International, Inc., SafeStitch, LLC, the several banks party to the Loan and Security Agreement and Hercules Capital, Inc., as administrative agent and collateral agent.
|
|
|
|
|
|
10.3 +
|
|
TransEnterix, Inc. Amended and Restated Incentive Compensation Plan, as amended and restated effective April 24, 2019 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed April 26, 2019)
|
|
|
|
|
|
|
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).
|
|
|
|
|
|
|
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.
|
|
+
|
A management contract, compensatory plan or arrangement required to be separately identified.
|
|
*
|
Filed herewith.
|
|
!
|
Portions of this exhibit have been omitted because the information is not material and would likely cause competitive harm if publicly disclosed.
|
|
|
|
|
TransEnterix, Inc.
|
|
|
|
|
|
|
Date: August 8, 2019
|
|
By:
|
/s/ Todd M. Pope
|
|
|
|
Todd M. Pope
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Joseph P. Slattery
|
|
Date: August 8, 2019
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Joseph P. Slattery
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Executive Vice President and Chief Financial Officer
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AUTOLAP SYSTEM SALE AGREEMENT
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(1)
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TransEnterix, Inc., a company incorporated in Delaware, USA, with SEC File No. 000-19437 whose principal executive office is at 635 Davis Drive, Suite 300, Morrisville NC USA 27560 ("Seller"); and
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(2)
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Great Belief International Limited, a company incorporated in British Virgin Islands under number 2364376 whose registered office is at P. O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands. ("Buyer")
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(A)
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The Seller has developed the Autolap System.
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(B)
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The Seller has agreed to sell and transfer the System to the Buyer, and the Buyer has agreed to purchase the same, subject to the terms and conditions in this Agreement.
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1.
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DEFINITIONS AND INTERPRETATION
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1.1
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In this Agreement, unless the context otherwise requires:
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"agreed form"
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means a form which has been agreed by the Parties and which has been duly executed or initialled by them or on their behalf for identification purposes with any alterations that may be agreed between the Parties in writing;
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"Ancillary Agreements"
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means the Cross-License Agreement, the IPR Assignments and the Subscription Agreement;
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"Business Day"
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In respect of any action to be taken by the Buyer, means any day on which the companies in PRC are generally open for business in the PRC, including a Saturday or Sunday which the PRC government temporarily declares to be a working day, but excluding a statutory holiday, a Saturday or Sunday other than a Working Rest Day, and a weekday which the PRC government temporarily declares to be a rest day; in respect of any action to be taken by the Seller, means a day, other than a Saturday, Sunday or public holiday, on which banks are open for non-automated commercial business in the United States and Business Days means more than one of them;
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"CFDA"
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means the China Food and Drug Administration;
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"Closing 1"
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means the first completion of the sale and purchase of the System in accordance with clause 4;
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"Closing 2"
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means the second completion of the sale and purchase of the System in accordance with clause 6;
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"Consideration"
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means the sum specified in clause 3.1;
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" Cross-License Agreement"
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means an agreement between Buyer and Seller, to be entered into at Closing 2 in the form indicated in Schedule 5, wherein: (a)_Seller grants to Buyer the right to use the Platform Software and the Licensed Patents, in each case solely for manufacture, use or sale of the System; (b) Buyer grants back to Seller the right to use the System IPR and any Intellectual Property Rights in improvements to the System IPR or to the System;
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"Encumbrance"
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means any mortgage, charge, pledge, lien or other security interest of any kind, and any right of set off, assignment by way of security, trust or other agreement or arrangement whatsoever for the purpose of providing security or having similar effect to the provision of security and Encumbrances means more than one of them;
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"Intellectual Property Rights"
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means copyright, rights in inventions, patents, know-how, trade secrets, trademarks and trade names, service marks, design rights, rights in get-up, database rights and rights in data, semiconductor chip topography rights, rights in software, rights in domain names and social media accounts, the right to sue for passing off, utility models, and all similar rights and, in each case:
(a) whether registered or not;
(b) including any applications to protect or register such rights;
(c) including all renewals and extensions of such rights or applications;
(d) whether vested, contingent or future; and
(e) wherever existing;
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"IPR Assignments"
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means the Assignment Agreement for the System IPR in the form provided at Schedule 6, and any other assignments as may be signed by the parties to effect the transfer of the System IPR to the Buyer;
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“Licensed Patents”
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Means the patents indicated in Schedule 2, Part 2, as well as any divisionals, continuations, etc. of those patents
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"Nominated Account"
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means the Seller's account as set forth in Error! Reference source not found. to this Agreement;
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"OEM Manufacturers"
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means Novatec Ltd. and Medimor Ltd., companies based in Israel that prior to the date of this Agreement manufactured the AutoLap System under contract with and on behalf of the Seller;
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"Platform Software"
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means certain software utilized in the System as of the date of this Agreement and described in Error! Reference source not found., Part 1.
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"Registration Agent"
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means Xizang Haisco Pharmaceutical Group Co. Ltd., the agent engaged by the Seller to undertake medical device registration for the System with the CFDA.
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"Registration Information"
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means all material test or trial results, analysis, protocols, correspondence, filings, drawings or descriptions, specifications, System information and any other work product of any kind produced, prepared or compiled by the Registration Agent in connection with CFDA registration for the System, and necessary or convenient for Buyer to continue to progress the CFDA registration.
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"System"
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means the laparoscope positioning system previously marketed by MST – Medical Surgical Technologies Ltd as the ‘AutoLap’ System.
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"System Assets"
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means the System Capital Goods, the System Information, the System IPR, and the System Software and System Asset means one of them;
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"System Capital Goods"
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means the System Stock and the System Tooling and Equipment, including those listed in Schedule 1, Part 4;
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"System Information"
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means all drawings, specifications, procedures, manuals, and other information, know-how and techniques in any form which wholly or partially relate to all or any part of the System design, manufacture, installation, operation, calibration and testing, marketing, or maintenance;
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"System IPR"
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means the Intellectual Property Rights in connection with the System owned by the Seller, and with respect to patents means in particular the patents indicated in Schedule 1, Part 1 as well as any divisionals, continuations, etc. of those patents;
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"System Software"
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means the computer software incorporated into the System, as further described in Schedule 1, Part 2 (not including the Platform Software, or any third party development tools, such as Microsoft Development Tools);
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"System Stock"
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means stores, raw materials and components purchased for incorporation into the System, spare parts, and work-in-progress, together with finished products of the System or parts thereof;
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"System Tooling and Equipment"
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means all equipment, machinery, special tooling, moulds, jigs, fittings, and other assets owned by the Seller and used exclusively in the manufacture of the System at the date of this Agreement;
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“Subscription Agreement”
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means that certain Subscription Agreement, dated and executed as of the date hereof and attached as an exhibit hereto pursuant to which Buyer shall purchase 15,000,000 shares of Seller’s common stock at $2.00 per share.
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"Warranties"
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means the representations and warranties set out in Schedule 1 and Warranty means one of them.
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1.2
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Unless the context otherwise requires:
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1.2.1
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each gender includes the other genders;
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1.2.2
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the singular includes the plural and vice versa;
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1.2.3
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references to clauses, Schedules or Appendices are to clauses, Schedules and Appendices (if any) of this Agreement;
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1.2.4
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references to this Agreement include its Schedule and Appendices (if any);
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1.2.5
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references to persons include individuals, unincorporated bodies, government entities, companies and corporations;
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1.2.6
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the words 'including' or 'includes' mean including or includes without limitation;
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1.2.7
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clause headings do not affect their interpretation; and
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1.2.8
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references to legislation include any modification or re-enactment thereof before the date of this Agreement.
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2.
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SALE AND PURCHASE OF THE SYSTEM AND THE SYSTEM ASSETS
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2.1
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Subject to the terms and conditions of this Agreement the Seller will sell, free from all Encumbrances, and the Buyer will buy, the System and System Assets.
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2.2
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In addition, on the date hereof, the parties are entering into the Cross-License Agreement under which:
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2.2.1
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Seller will license Buyer to use the Platform Software and the Licensed Patents, in each case solely for manufacture, use or sale of the System; and
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2.2.2
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Buyer will grant back to Seller a license to use the System IPR and any Intellectual Property Rights in improvements to the System IPR or to the System .
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3.
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CONSIDERATION
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3.1
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The total consideration for the transfer by Seller to Buyer of the System and the System Assets shall be US$47,000,000.
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3.2
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The consideration shall be paid as follows:
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3.2.1
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US$5,000,000 at Closing 1;
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3.2.2
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The purchase of 15,000,000 shares of Seller’s common stock pursuant to the Subscription Agreement to be purchased no later than September 30, 2019; and
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3.2.3
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US$12,000,000 at Closing 2.
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3.3
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All sums payable under this Agreement and the Subscription Agreement are exclusive of VAT (or similar tax) and shall be paid free and clear of all deductions and withholdings whatsoever, unless the deduction or withholding is required by law. If any deduction or withholding is required by law the Buyer shall pay to the Seller such sum as will, after the deduction or withholding has been made, leave the Seller with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding. For the avoidance of doubt, Seller shall be solely responsible for, and Buyer's obligation in the previous sentence shall not apply to, any fees charged by Seller's own bank, and any taxes, levies or assessments required by the government in the Seller's location.
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4.
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CLOSING 1
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4.1
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Closing 1 shall take place on July 31 2019.
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4.2
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At Closing 1, the matters set out in clauses 4.2.1 and 4.2.2 shall be transacted.
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4.2.1
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The Seller shall deliver, procure the delivery of, make available or procure the availability to the Buyer of:
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(a)
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this Agreement and the Subscription Agreement, each duly executed by the Seller as of July 3, 2019;
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(b)
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a certified copy of the resolutions of the Seller's board of directors approving the transaction and authorising the execution and delivery of this Agreement, the Subscription Agreement and other documents required to be signed by the Seller in accordance with this Agreement; and
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(c)
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delivery of the form of instruction letter to be delivered by the Seller to the Seller’s transfer agent regarding the issuance of 15,000,000 shares of Seller’s common stock, issued in the name of the Buyer, in exchange for the funds paid under clause 4.2.2(c).
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4.2.2
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The Buyer will:
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(a)
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deliver, procure the delivery of, make available or procure the availability to the Seller of:
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(i)
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this Agreement and the Subscription Agreement, each duly executed by the Buyer as of July 3, 2019;
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(ii)
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a certified copy of the board resolutions of the Buyer authorising the execution and delivery of this Agreement, the Subscription Agreement and the other documents required to be signed by the Buyer in accordance with this Agreement;
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(b)
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pay the sum of US$5,000,000 to the Seller by way of electronic transfer of funds into the Nominated Account, receipt of which sum in such account by such date shall constitute a good discharge to the Buyer in respect of its obligation under clause 3.2.1.
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(c)
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By no later than September 30, 2019, the Buyer shall pay the sum of US$30,000,000 to the Seller by way of electronic transfer of funds into the Nominated Account, receipt of which sum in such account by such date shall constitute a good discharge to the Buyer in respect of its obligation under clause 3.2.2 and under the Subscription Agreement.
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4.3
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If either Party fails or is unable to perform any obligation required to be performed by it under clause 4.2 at Closing 1 or within the time periods set forth in clause 4.2, the other Party shall not be obliged to complete its obligations under clause 4.2, the sale and purchase of the System,
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4.4
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If this Agreement terminates pursuant to clause 4.3, each Party’s further rights and obligations cease immediately on termination, save that clauses 1 (Definitions and interpretation), 10.6 (Entire agreement), 10.10 (Costs), 11 (Notices), 12 (Confidential information) and 13 (Governing law and jurisdiction) shall remain in full force and effect and termination shall not affect any Party’s accrued rights and obligations at the date of termination.
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5.
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DELIVERY OF SYSTEM CAPITAL GOODS
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5.1
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The Seller shall, within ten (10) days after Closing 1, deliver the System Capital Goods to Buyer's designated carrier. The System Capital Goods will be delivered on an Ex Works (Incoterms 2010) basis to Buyer's designated carrier at Seller's chosen premises in the United States. Buyer will be responsible, on a timely basis, for taking delivery of the System Capital Goods, and for arranging and paying all costs in relation to shipping, insurance, export and import clearance, and customs duties.
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5.2
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The Buyer or its affiliate shall maintain shipping insurance on the System Capital Goods through arrival at their final destination, in a minimum amount of US$5,000,000, and the Seller shall be named as the beneficiary on the policy of insurance. Buyer shall provide proof of such insurance prior to taking delivery of the System Capital Goods in accordance with clause 5.1.
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5.3
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Risk of loss in the System Capital Goods will pass upon delivery to Buyer's designated carrier at Seller's premises, and title will pass on the Seller's receipt of full payment as provided for in clause 6.2.2.
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5.4
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The failure of Buyer (or its affiliate) to take delivery of the System Capital Goods within forty-five (45) days after Buyer makes the goods available in accordance with clause 5.1, shall constitute a material breach of this Agreement.
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5.5
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Buyer shall keep Seller informed of progress in the transportation of the System Capital Goods.
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5.6
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In any case that the Seller fails to deliver the System Capital Goods to Buyer’s affiliate’s in accordance with clause 5.1, the Seller shall refund US$5,000,000 to Buyer without any deductions or withholdings whatsoever, after which this Agreement and its Ancillary Agreements shall automatically terminate.
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6.
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CLOSING 2
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6.1
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Closing 2 shall take place on or before 30 November 2019 at a date, time and place to be agreed by the Parties.
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6.2
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At Closing 2, the matters set out in clauses 6.2.1 through 6.2.3 shall be transacted.
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6.2.1
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The Seller shall procure the delivery of, make available or procure the availability to the Buyer of:
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(a)
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possession of digital copies of current versions of all of the following:
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(i)
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the System Information;
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(ii)
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the Registration Information (to the extent available);
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(iii)
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the System Software (source code and compiled versions);
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(iv)
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the Platform Software (compiled versions only)
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6.2.2
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The Buyer will pay the sum of US12,000,000 to the Seller by way of electronic transfer of funds for the same day value into the Nominated Account, receipt of which sum in
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6.2.3
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The Seller, or a subsidiary of the Seller, and Buyer shall execute, or cause to be executed, and enter into:
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(a)
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the Cross-License Agreement;
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(b)
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in respect of the System IPR, the duly executed IPR Assignment in the agreed forms;
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6.3
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If either Party fails or is unable to perform any of its obligation required to be performed by it under clause 6.2 at Closing 2, the other Party shall not be obliged to complete its obligations under clause 6.2, the sale and purchase of the System, or any other terms of this Agreement, and may unilaterally terminate this Agreement, in which case:
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6.3.1
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All of the executed Ancillary Agreements (other than the Subscription Agreement) will automatically terminate;
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6.3.2
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If termination of this Agreement is caused by the Buyer’s failure to perform any of its obligation required to be performed by it under clause 6.2 at Closing 2, Buyer shall promptly return or procure the return of all of the System Capital Goods to Seller's designated premises in the United States, at Buyer's own risk and expense; and
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6.3.3
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If termination of this Agreement is caused by the Seller’s failure to perform any of its obligation required to be performed by it under clause 6.2 at Closing 2, Buyer shall promptly return or procure the return of all of the System Capital Goods to Seller's designated premises in the United States, at Seller's own risk and expense;
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6.3.4
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Upon return of the System Capital Goods in accordance with clause 6.3.2 or 6.3.3, Seller shall return all funds received by it from Buyer under clause 4.2.2(b) and 6.2.2 prior to that date; provided, however, that if the failure of Closing 2 is a result of Buyer's failure to perform any of its other obligations hereunder, the Seller will be entitled (without limitation to its rights to claim any damages or other compensation to which it may be entitled) to retain US$[XXXXXXXXX] as damages; and if the failure of Closing 2 is a result of Seller's failure to perform any of its other obligations hereunder, the Buyer will be entitled to claim damages and compensation including but not limited to its expenses for shipping the System Capital Goods from the US to Hong Kong. For the avoidance of doubt, Buyer shall not be obligated or entitled to return the shares of Seller’s common stock purchased at Closing 1 in accordance with clauses 3.2.2 and 4.2, nor shall Seller by obligated to repay the sums paid for such shares under the Subscription Agreement.
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6.4
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If this Agreement terminates pursuant to clause 6.3, each Party’s further rights and obligations cease immediately on termination, save that clauses 1 (Definitions and interpretation), 6.3 (consequences of termination), 10.6 (Entire agreement), 10.10 (Costs), 11 (Notices), 12 (Confidential information) and 13 (Governing law and jurisdiction) shall remain in full force and effect, and termination shall not affect any Party’s accrued rights and obligations at the date of termination.
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7.
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ACTIONS AFTER CLOSING 2
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7.1
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Further acts - transfer of Registration Information
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7.1.1
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It is anticipated that Buyer will not use the services of the Registration Agent, but will use its own designated agent for the CFDA registration.
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7.1.2
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The Parties will procure the Registration Agent's cooperation with the transfer of the Registration Information to Buyer or its designee.
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7.1.3
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For a period of up to six months after Closing 2, Seller shall provide, or ensure that the Registered Agent provides, support to Buyer to ensure that the Registration Information is complete, and to respond to any reasonable queries that Buyer may have with respect to the Registration Information or the steps undertaken prior to Closing 1 in preparation for CFDA registration.
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7.1.4
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Seller shall bear any fees and expenses of the Registration Agent in regard to the undertakings under 7.1.2 to 3.
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7.2
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Transfers of registered System IPR
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7.3
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Knowledge transfer and support
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7.3.1
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Seller shall provide all necessary resources and support to ensure a full and complete transfer of the System IPR, and further to 7.3.2 will use its commercially reasonable efforts to make Buyer / OEM Manufacturer personnel working with the System understand the technology and methods embodied in the System and necessary for its manufacture and servicing.
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7.3.2
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At no cost to Buyer, Seller shall provide reasonable support in the first six months after Closing 2 to Buyer. For the avoidance of any doubt, when support is demanded by the Buyer, Seller shall provide personnel that are qualified to support. Support shall be provided on a timely basis when requested by the Buyer either remotely (as a preference), at OEM Manufacturer's facility in Israel, or at Seller's facility in the US, as agreed by Buyer and Seller on an on-going basis. Seller and Buyer will each be responsible for its own costs of travel etc. in respect of such support services. If additional support beyond that provided for above is required by Buyer in any period, Buyer may purchase such additional support services from Seller at Seller's then current standard rates for technical services, and subject to reimbursement of Seller's reasonable costs for travel, etc.
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7.3.3
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Seller will introduce Buyer to the OEM Manufacturers with a view to facilitating Buyer's establishment of arrangements with the OEM Manufacturers for production of the System. However, it will be Buyer's sole responsibility to negotiate, enter into and ensure performance of any agreement with the OEM Manufacturers.
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8.
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WARRANTIES
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8.1
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The Seller represents, warrants and undertakes to the Buyer that at Closing 1 and Closing 2 the Warranties set out in Schedule 1, Part A, are true, accurate and not misleading.
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8.2
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The Buyer represents, warrants and undertakes to the Seller that at Closing 1 and Closing 2 the Warranties set out in Schedule 1, Part B, are true, accurate and not misleading.
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8.3
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For the purpose of this clause 8 the term fairly and reasonably disclosed means disclosed in such manner and in such detail as to enable a reasonable person to make an informed and accurate assessment of the matter concerned.
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8.4
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Each Party acknowledges that the other has entered into this Agreement on the basis of such Warranties. For the avoidance of doubt, claims in relation to breach of the representations and
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8.5
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Each of the Warranties is a separate warranty and will not be limited or restricted by reference to the terms of any other Warranty or any other term of this Agreement.
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8.6
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The System is sold "as is". The Seller makes no warranties or representations other than those in Schedule 2, and excludes to the full extent permitted by law any other warranties whatsoever, including without limitation any warranties as to the suitability of the System for any particular purpose, as to its merchantability or marketability, or as to Buyer's ability to obtain any regulatory approvals in relation to the System.
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9.
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LIABILITIES AND INDEMNITY
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9.1
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Definitions
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"Losses"
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means all damages, liabilities, demands, costs, expenses, claims, actions and proceedings (including all consequential, direct, indirect, special or incidental loss or punitive damages or loss, legal and other professional fees, cost and expenses, fines, penalties, interest and loss of profit or any other form of economic loss (including loss of reputation))
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"Minimum Liability"
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means US$[XXXXXXX];
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"Claim Period"
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means the period following Closing 2 and continuing until 24 months after the commencement of sales of the System by Buyer.
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9.2
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Indemnity
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9.2.1
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any act or omission by the first Party that is in breach of this Agreement;
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9.2.2
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any breach of the Warranties by the first Party, provided that the claim is issued and served on the other Party during the Claim Period;
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9.2.3
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any third party claim relating to the provision, supply or use of the System, provided that in the case of a third party claim brought against Buyer, the third party claim is served on the Buyer during the Claim Period.
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9.3
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De minimis claims
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9.3.1
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Once the total of the claims exceeds in aggregate the Minimum Liability, the breaching Party shall be liable for the whole amount of such claim and not just for the amount exceeding the Minimum Liability.
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9.3.2
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No single claim may be made against a Party under the Warranties if the amount to be claimed does not exceed US$[XXXXXX].
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9.4
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Maximum liability
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9.5
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Pre-Notice of a claim
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9.6
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Specific Limitations
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9.6.1
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Neither Party shall be able to bring a claim against the other if and to the extent that:
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(a)
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the breach on which the claim is based occurs as a result of any legislation not in force at the date of this Agreement taking effect retrospectively, any increase in the rates of taxation in force at that date or as a consequence of a change in the interpretation of the law in any jurisdiction after the date of this Agreement,
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(b)
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the claim relates to any loss for which the Party is indemnified by insurance.
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9.6.2
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If a Party is prevented by clause 9.6.1 from bringing any claim in whole or in part, the losses, costs or damages the Party would have sought to recover in such claim shall not be taken into account when calculating the Minimum Liability.
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9.6.3
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No claim shall be made by a Party in relation to a fact, omission, if the Party has actual, constructive or imputed knowledge of the fact, omission, circumstance or occurrence at the time of execution of this Agreement.
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9.7
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Conduct of claims
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9.7.1
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not make any admission of liability or agreement or compromise with any party without prior consultation with and the agreement of the other Party;
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9.7.2
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take such action to avoid, dispute, resist, appeal, compromise or contest the dispute as the other Party may request, at the other Party's expense; and
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9.7.3
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make available to the other Party all information required and available to enable the other Party to avoid, dispute, resist, appeal, compromise or contest the claim and any liability connected with the claim,
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9.8
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Recovery from third parties
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9.9
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General
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9.9.1
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Nothing in this clause shall in any way diminish Parties' obligation to take reasonable measures to mitigate their losses.
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9.9.2
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If any potential claim arises by reason of a liability that is contingent only, then the Seller shall not be under any obligation to make any payment for that claim until such time as the contingent liability becomes actual.
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9.9.3
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The Buyer confirms to the Seller that it is not at the date of this Agreement, and after discussion with its accountants and attorneys, aware of any matter or thing that in its reasonable opinion would or may give rise to any claim.
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9.9.4
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Nothing contained in this clause or any other terms of this Agreement shall affect any claim or other action by the Buyer in the case of fraud or other dishonesty or any omission or wilful or fraudulent misstatement the Seller or its agents may make or commit.
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10.
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MISCELLANEOUS
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10.1
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Variation
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10.2
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Severability
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10.3
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Waiver
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10.4
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Further assurance
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10.5
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Assignment
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10.5.1
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Except as otherwise agreed by the Parties, neither Party may assign or grant an Encumbrance over or deal in any way with any of its rights under this Agreement; provided, however, that Seller shall have the right to freely transfer all of its rights and obligations under this Agreement to any party acquiring substantially all, or a major part, of the business and/or assets of the Seller, as long as the successor assumes all of Seller’s obligations to Buyer; and Buyer shall have the right to freely transfer all of its rights and obligations under this Agreement to any party acquiring substantially all, or a major part, of the business and/or assets of the Buyer, as long as the successor assumes all of Buyer’s obligations to Seller under this Agreement.
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10.6
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Entire agreement
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10.7
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No joint venture or agency
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10.8
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Succession
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10.9
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Counterparts
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10.10
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Costs
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11.
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NOTICES
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11.1
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Notices under this Agreement will be in writing and sent to the person and address in clause 11.2. They may be given, and will be deemed received:
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11.1.1
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by international courier: five Business Days after posting;
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|
11.1.2
|
by hand: on delivery.
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|
11.1.3
|
by e-mail: on the next Business Day after sending to the correct address (provided that no notice of failure of delivery is received by the sender).
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|
11.2
|
Notices will be sent:
|
|
11.2.1
|
to the Seller at:
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|
11.2.2
|
to the Buyer at:
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|
12.
|
CONFIDENTIAL INFORMATION
|
|
12.1
|
Neither Party will, without the other’s prior written consent, disclose:
|
|
12.1.1
|
the existence or terms of this Agreement; provided, however, if this Agreement or certain of its terms are material to Seller, Seller is authorized to disclose the terms of the Agreement in accordance with U.S. securities laws, including filing this Agreement with its filings with the U.S. Securities and Exchange Commission; and
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|
12.1.2
|
any information relating to the customers, suppliers, methods, products, plans, finances, trade secrets or otherwise to the business or affairs of the other Party,
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|
12.2
|
Neither Party will use the other's Confidential Information except to perform this Agreement or as contemplated by this Agreement.
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|
12.3
|
Disclosure of Confidential Information may be made to such of a Party's officers, employees, professional advisers and consultants as reasonably necessary to advise on this Agreement and the transaction as a whole on the condition that the disclosing Party is responsible for such third party's compliance with the obligations under this clause. Disclosure may also be made as required by law, the Securities and Exchange Commission, any stock exchange, or any other regulatory body.
|
|
12.4
|
Confidential Information does not include information which is:
|
|
12.4.1
|
publicly available, other than as a result of a breach of this Agreement by a Party; or
|
|
12.4.2
|
lawfully available to a Party from a third party free from any confidentiality restriction; or
|
|
12.4.3
|
required by law, regulation or by order or ruling of a court or administrative body of a competent jurisdiction to be disclosed (but in which case to the absolute minimum necessary) provided that the disclosing Party shall use its reasonable endeavours to first consult fully with the other Party to establish whether and, if so, how far it is possible to prevent or restrict such enforced disclosure and take all steps as it may reasonably require to achieve prevention or restriction.
|
|
12.5
|
Without the express written consent of Seller, Buyer shall not make any public announcement or otherwise disclose to any third party the existence of this Agreement or any agreement ancillary to it, or the fact that discussions concerning a potential collaboration are taking place, except as required by law, the Securities and Exchange Commission, any stock exchange, or any other regulatory body. In the event such a disclosure is required, Buyer shall notify Seller no less than 24 hours in advance of the disclosure.
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|
12.6
|
Without the express written consent of Buyer, Seller shall not make any public announcement or otherwise disclose to any third party the existence of this Agreement or any agreement
|
|
13.
|
GOVERNING LAW AND JURISDICTION
|
|
13.1
|
This Agreement and any dispute or claim arising out of, or in connection with, it, its subject matter or formation (including non-contractual disputes or claims) shall be governed by, and construed in accordance with, the laws of Hong Kong, excluding the United Nations Convention on the International Sale of Goods.
|
|
13.2
|
Any dispute, difference or claim arising out of, in connection with or relating to this Agreement shall be submitted to and finally resolved by arbitration in Hong Kong under the auspices of the Hong Kong International Arbitration Commission (“HKIAC”), in accordance with the HKIAC Administered Arbitration Rules then in effect, which rules are hereby incorporated by reference into this Agreement. The arbitral tribunal shall consist of three arbitrators. One of the arbitrators shall be a national of the PRC, one a national of the US, and one of a third country. The arbitral proceedings shall be conducted in English.
|
|
Executed by TransEnterix Inc. acting by Anthony Fernando, its COO.
|
/s/ Anthony Fernando
|
|
Executed by Great Belief International Limited acting by Mr. Wang Yan, its authorized representative.
|
/s/ Wang Yan
|
|
Schedule 1
|
System Assets
|
|
Schedule 2
|
Platform Software
|
|
Schedule 3
|
Warranties
|
|
Schedule 4
|
Nominated Account
|
|
Schedule 5
|
Cross-License Agreement
|
|
Schedule 6
|
Assignment Agreement
|
|
1.
|
The Seller
|
|
1.1
|
The Seller is a company duly incorporated and existing under the laws of Delaware, USA.
|
|
1.2
|
The Seller has all requisite corporate power and authority to execute and perform this Agreement and all agreements and documents ancillary to it.
|
|
1.3
|
This Agreement and all agreements and documents ancillary to it constitute valid, legal, binding and enforceable obligations on the Seller.
|
|
1.4
|
To the Seller's knowledge, no order has been made, petition presented or resolution passed for the winding-up of the Seller and no administration order or administration application or notice of appointment of or notice of intention to appoint an administrator has been made or issued in relation to the Seller.
|
|
1.5
|
No receiver or administrative receiver has been appointed over any part of the System or the System Assets, no application has been made to the court for any such appointment, and no power of sale or power to appoint a receiver or administrative receiver under the terms of any charge, mortgage or security over the System Assets has become exercisable.
|
|
1.6
|
Performance by the Seller of the terms of this Agreement and such agreements and documents ancillary to it do not and will not conflict with or result in a breach of any of the provisions of the Seller memorandum or articles of association or any contractual, governmental or public agreement or other obligation made or given by the Seller, or any applicable laws, regulations, acts and other governmental policies especially those of the United States of America.
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|
2.
|
The System Assets
|
|
2.1
|
The Seller or its indirect wholly owned subsidiary TransEnterix Europe, S.A.R.L., acting through its Swiss branch being established under the name “TransEnterix Europe SARL, Bertrange, Swiss Branch Lugano (the “Subsidiary”) has good title to all the System Assets and is the legal and beneficial owner of all the System Assets. No System Asset are subject to any Encumbrance as of the date of transfer to Buyer.
|
|
2.2
|
To the Seller’s best knowledge, it is not aware of other parties’ rights which would be infringed upon by the use of the System Assets by the Buyer subject to this Agreement.
|
|
2.3
|
The System Assets provided to Buyer are inclusive of all the versions of the System Assets (including the historical and latest versions, especially for the System Information, System IPR and System Software) created, possessed and obtained by the Seller.
|
|
3.
|
Intellectual Property Rights
|
|
3.1
|
The Subsidiary is the legal owner of the System IPRs.
|
|
3.2
|
To the Seller's and Subsidiary’s knowledge, none of the System IPRs are subject to any dispute, infringement and/or challenge.
|
|
3.3
|
All System IPRs are freely assignable without requiring any consent.
|
|
3.4
|
To the Seller's knowledge, none of the elements or activities of the System have infringed the Intellectual Property Rights of any person in circumstances which would entitle any person to make a claim against the Seller. The Seller has not received notice of any claim which alleges that the Seller is infringing such person's Intellectual Property Rights in relation to the System.
|
|
3.5
|
The System IPRs are not subject to any Encumbrance or any other rights exercisable by other parties, and the Seller is not obliged to grant any Encumbrance in respect of the System IPRs.
|
|
4.
|
Information Technology
|
|
4.1
|
If the Subsidiary is the legal and beneficial owner of the System Software, then the Subsidiary is the one and only legal and beneficial owner of such System Software; if the Subsidiary is not the legal and beneficial owner of any portion of the System Software or Platform Software, then the Subsidiary and its affiliates, including the Seller, have the contractual right to use, the System Software or Platform Software, free from Encumbrances and all other rights exercisable by other parties. The Seller has obtained all necessary rights from third parties to permit the Subsidiary and its affiliates, including the Seller to use the System Software and Platform Software exclusively and without restrictions and is able to cause the Subsidiary to transfer the System Software and Platform Software to the Buyer.
|
|
4.2
|
The Subsidiary licenses all software necessary to enable the System to continue in the ordinary course of business and the Seller is able to cause the Subsidiary to transfer such software to the Buyer.
|
|
4.3
|
The Seller is not aware of any fact, matter, event or circumstance which may adversely affect the continued use of the System Software or Platform Software by Buyer after Closing 2.
|
|
5.
|
Litigation
|
|
5.1
|
Neither the Seller nor any person for whom the Seller may be vicariously liable in relation to the System or the System Assets is engaged, concerned or involved in (whether as an applicant, respondent or otherwise) any litigation, arbitration or other proceedings relating to the System or the System Assets which are in progress, threatened or pending by or against the Seller or the System or any of the System Assets and there are no facts of circumstances known to the Seller likely to give rise to any such litigation, arbitration or other proceedings.
|
|
1.1
|
The Buyer is a company duly incorporated and existing under the laws of British Virgin Islands.
|
|
1.2
|
The Buyer has all requisite corporate power and authority to enter into and perform this Agreement and all agreements and documents ancillary to it.
|
|
1.3
|
This Agreement and all agreements and documents ancillary to it constitute valid, legal, binding and enforceable obligations on the Seller.
|
|
1.4
|
To the knowledge of the Buyer, no order has been made, petition presented or resolution passed for the winding-up of the Buyer and no administration order or administration application or notice of appointment of or notice of intention to appoint an administrator has been made or issued in relation to the Buyer.
|
|
1.5
|
No receiver or administrative receiver has been appointed over any part of the business or assets of Buyer, no application has been made to the court for any such appointment, and no power of sale or power to appoint a receiver or administrative receiver under the terms of any charge, mortgage or security over the System Assets has become exercisable.
|
|
1.6
|
Performance by the Buyer of the terms of this Agreement and such agreements and documents ancillary to it do not and will not conflict with or result in a breach of any of the provisions of the Buyer memorandum or articles of association or any contractual, governmental or public agreement or other obligation made or given by the Buyer.
|
|
(A)
|
Borrowers shall maintain unrestricted Cash in one or more accounts subject to Account Control Agreements in an amount equal to at least 166% of the principal amount of the Term Loans outstanding; or
|
|
(B)
|
(x) Borrowers shall maintain unrestricted Cash in one or more accounts subject to Account Control Agreements in an amount equal to at least 110% of the principal amount of the Term Loans outstanding, and (y) Parent’s market capitalization (determined based on Parent’s public closing price per share (as quoted by Bloomberg L.P. or such other inter-dealer quotation system reasonably acceptable to Agent) multiplied by the fully diluted shares outstanding) shall be at least $150,000,000 (calculated based on a 10-trading day volume weighted average price) at all times, provided that if Parent’s market capitalization falls below $150,000,000, the Waiver Condition shall be deemed satisfied upon Borrowers depositing within five Business Days after Parent’s market capitalization falls below $150,000,000 additional unrestricted Cash into one or more accounts subject to Account Control Agreements in an amount to satisfy the conditions set forth in Section 7.21(e)(ii)(A).”
|
|
By:
|
TransEnterix, Inc., its sole member
|
|
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.
|
|
|
August 7, 2019
|
|
|
|
|
By:
|
/s/ Todd M. Pope
|
|
|
Todd M. Pope
President and Chief Executive Officer (Principal
Executive Officer)
|
|
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.
|
|
|
August 7, 2019
|
|
|
|
|
By:
|
/s/ Joseph P. Slattery
|
|
|
Joseph P. Slattery
Executive Vice President and Chief Financial Officer
(principal financial officer and principal accounting officer)
|
|
By:
|
/s/ Todd M. Pope
|
|
|
Todd M. Pope
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
August 7, 2019
|
|
|
|
|
By:
|
/s/ Joseph P. Slattery
|
|
|
Joseph P. Slattery
Executive Vice President and Chief Financial Officer
(principal financial officer and principal accounting officer)
|
|
|
August 7, 2019
|