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Organization and Capitalization

1.	Organization and Capitalization

TransEnterix, Inc. (the “Company”) is a medical device company that is pioneering the use of robotics to improve minimally invasive surgery by addressing the clinical challenges associated with current laparoscopic and robotic options. The Company is focused on the commercialization and further development of ALF-X ^® Surgical Robotic System (the “ALF-X System”), a multi-port robotic system that brings the advantages of robotic surgery to patients while enabling surgeons with innovative technology, and the development and commercialization of the SurgiBot™ System, a single-port, robotically enhanced laparoscopic surgical platform. The ALF-X System has been granted a CE Mark in Europe for use in urology, general surgery, gynecology and thoracic surgery, but is not available for sale in the U.S. The SurgiBot System has been submitted for clearance to the FDA, and is not yet available for sale in any market.

The ALF-X System is a multi-port robotic surgery system which allows multiple arms to control robotic instruments and a camera. The system features advanced technology to enable surgeons with haptic feedback and the ability to move the camera via eye movement. The system replicates laparoscopic motion that is familiar to experienced surgeons, and features three-dimensional high definition (“3DHD”) vision technology. The ALF-X System also offers responsible economics to hospitals by offering robotic technology with reusable instruments with minimal additional costs per surgery.

The SurgiBot System is designed to utilize flexible instruments through articulating channels controlled directly by the surgeon, with robotic assistance, while the surgeon remains patient-side within the sterile field. The flexible nature of the SurgiBot System allows for multiple instruments to be introduced and deployed through a single site, thereby offering room for visualization and manipulation once inside the body. The SurgiBot System also allows for 3DHD vision technology.

On September 3, 2013, TransEnterix Surgical, Inc. a Delaware corporation (“TransEnterix Surgical”), and SafeStitch Medical, Inc., a Delaware corporation (“SafeStitch”) consummated a merger transaction whereby TransEnterix Surgical merged with a merger subsidiary of SafeStitch, with TransEnterix Surgical as the surviving entity in the merger (the “Merger”). As a result of the Merger, TransEnterix Surgical became a wholly owned subsidiary of SafeStitch. On December 6, 2013, SafeStitch changed its name to TransEnterix, Inc. and increased the authorized shares of common stock from 225,000,000 to 750,000,000, and authorized 25,000,000 shares of preferred stock, par value $0.01 per share. Prior to the Merger, SafeStitch was focused on developing its Gastroplasty Device for the treatment of obesity, gastroesophageal reflux disease (“GERD”) and Barrett’s Esophagus. In the second quarter of 2014, the Company ceased internal development of the Gastroplasty Device and is currently evaluating strategic alternatives for the former SafeStitch products.

On September 18, 2015, the Company entered into a Membership Interest Purchase Agreement, (the “Purchase Agreement”) with SOFAR S.p.A., (“SOFAR”) as seller, Vulcanos S.r.l. (“Vulcanos”), as the acquired company, and TransEnterix International, Inc. (“TransEnterix International”), a direct, wholly owned subsidiary of the Company which was incorporated in September 2015, as buyer. The closing of the transactions occurred on September 21, 2015 (the “Closing Date”) pursuant to which the Company acquired all of the membership interests of Vulcanos from SOFAR (the “ALF-X Acquisition”), and changed the name of Vulcanos to TransEnterix Italia S.r.l (“TransEnterix Italia”). The acquisition included all of the assets, employees and contracts related to the ALF-X System. See Note 3 for a description of the related transactions.

As used herein, the term “Company” refers to the combination of SafeStitch and TransEnterix Surgical after giving effect to the Merger, and TransEnterix International and TransEnterix Italia after giving effect to the ALF-X Acquisition, the term “SafeStitch” refers to the historic business of SafeStitch Medical, Inc. prior to the Merger, and the term “TransEnterix Surgical” refers to the historic business of TransEnterix Surgical, Inc. prior to the Merger.

The Company operates in one business segment.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Summary of Significant Accounting Policies

2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company and its direct and indirect wholly owned subsidiaries, SafeStitch LLC, TransEnterix Surgical, Inc., TransEnterix International, Inc. and TransEnterix Italia. All inter-company accounts and transactions have been eliminated in consolidation.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis. The Company has accumulated a deficit of approximately $182.9 million as of December 31, 2015, a net loss of approximately $46.9 million for the year ended December 31, 2015, and has not generated significant revenue or positive cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might result from the outcome of this uncertainty. To meet its capital needs, the Company is considering multiple alternatives, including, but not limited to, additional equity financings, debt financings and other funding transactions. There can be no assurance that the Company will be able to complete any such transaction on acceptable terms or otherwise. If the Company is unable to obtain the necessary capital, it will need to pursue a plan to license or sell its assets, seek to be acquired by another entity and/or cease operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include identifiable intangible assets and goodwill, stock compensation expense, excess and obsolete inventory reserves, allowance for uncollectible accounts, and deferred tax asset valuation allowances.

Reverse Merger

On September 3, 2013, TransEnterix Surgical and SafeStitch, consummated the Merger whereby TransEnterix Surgical merged with a merger subsidiary of SafeStitch, with TransEnterix Surgical as the surviving entity in the Merger. As a result of the Merger, TransEnterix Surgical became a wholly owned subsidiary of SafeStitch. On December 6, 2013, SafeStitch changed its corporate name to TransEnterix, Inc.

The Reverse Merger has been accounted for as a reverse acquisition under which TransEnterix Surgical was considered the acquirer of SafeStitch. As such, the financial statements of TransEnterix Surgical are treated as the historical financial statements of the combined company, with the results of SafeStitch being included from September 3, 2013.

As a result of the Reverse Merger with SafeStitch, historical common stock amounts and additional paid in capital have been retroactively adjusted using an Exchange Ratio of 1.1533.

Reverse Stock Split

On March 31, 2014, the Company effectuated a reverse stock split of its issued and outstanding shares of common stock at a ratio of 1 for 5 (the “Reverse Stock Split”). As a result of the Reverse Stock Split, the Company’s issued and outstanding stock decreased from 244,276,923 to 48,855,255 shares of common stock, all with a par value of $0.001. All information related to common stock, stock options, restricted stock units, warrants and earnings per share for prior periods has been retroactively adjusted to give effect to the Reverse Stock Split, except for the reference to the Merger Exchange Ratio of 1.1533.

Cash and Cash Equivalents, Restricted Cash, and Short-Term Investments

The Company considers all highly liquid investments with original maturities of 90 days or less at the time of purchase to be cash equivalents and investments with original maturities of between 91 days and one year to be short-term investments. In order to manage exposure to credit risk, the Company invests in high-quality investments rated at least A2 by Moody’s Investors Service or A by Standard & Poor.

Restricted cash, consisting of a money market account used as collateral securing a letter of credit under the terms of the corporate office operating lease that commenced in 2010.

The Company’s investments at December 31, 2013 consisted of corporate bonds and were classified as available for sale. Investments classified as available for sale are measured at fair value, and net unrealized gains and losses are recorded as a component of accumulated other comprehensive loss on the balance sheet until realized. Realized gains and losses on sales of investment securities are determined based on the specific-identification method and are recorded in interest expense, net. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization and accretion is included in interest expense, net. The Company held no investments as of December 31, 2015 and 2014 as it sold all its investment securities during 2014.

Fair Value of Financial Instruments

The carrying values of cash equivalents, accounts receivable, interest receivable, accounts payable, and certain accrued expenses at December 31, 2015 and 2014, approximate their fair values due to the short-term nature of these items. The Company’s notes payable balance approximates fair value as of December 31, 2015 and 2014, as the Company’s notes payable were amended and modified in the third quarter of 2015.

Concentrations and Credit Risk

The Company’s principal financial instruments subject to potential concentration of credit risk are cash and cash equivalents and investments held in money market accounts. The Company places cash deposits with a federally insured financial institution. The Company maintains its cash at banks and financial institutions it considers to be of high credit quality; however, the Company’s cash deposits may at times exceed the FDIC insured limit. Balances in excess of federally insured limitations may not be insured. The Company has not experienced losses on these accounts, and management believes that the Company is not exposed to significant risks on such accounts.

The Company’s accounts receivable are derived from net revenue to customers and distributors located throughout the world. The Company evaluates its customers’ financial condition and, generally, requires no collateral from its customers. The Company provides reserves for potential credit losses but has not experienced significant losses to date. The Company had one customer who constituted 100% of the Company’s net accounts receivable at December 31, 2015 and one customer who constituted 74% of the Company’s net accounts receivable at December 31, 2014. The Company had two customers who accounted for 37% and 10% of sales in 2014 and one customer who accounted for 37% of sales in 2013.

Accounts Receivable

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

Inventories

Inventories are stated at the lower of cost or market. Cost is based on the first in, first out method. The Company records reserves, when necessary, to reduce the carrying value of inventory to its net realizable value. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Any inventory on hand at the measurement date in excess of the Company’s current requirements based on anticipated levels of sales is classified as long-term on the Company’s consolidated balance sheets. The Company’s classification of long-term inventory requires it to estimate the portion of on-hand inventory that can be realized over the next 12 months.

Identifiable Intangible Assets and Goodwill

Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain intangible assets are amortized over 7 to 10 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. No impairment existed at December 31, 2015, 2014, or 2013.

Intellectual property consists of purchased patent rights and developed research and development acquired as part of a business acquisition. Amortization of the patent rights is recorded using the straight-line method over the estimated useful life of the patents of 10 years. Amortization of the developed research and development is recorded using the straight-line method over the estimated useful life of 7 years. This method approximates the period over which the Company expects to receive the benefit from these assets.

Indefinite-lived intangible assets, such as goodwill, are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis at December 31st or when events or changes in circumstances indicate evidence a potential impairment exists, using a fair value based test. The Company continues to operate in one segment, which is considered to be the sole reporting unit and therefore, goodwill was tested for impairment at the enterprise level. No impairment existed at December 31, 2015, 2014, or 2013.

In-Process Research and Development

In-process research and development (“IPR&D”) assets represent the fair value assigned to technologies that were acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects. During the period that the IPR&D assets are considered indefinite-lived, they are tested for impairment on an annual basis, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the IPR&D assets are less than their carrying amounts. If and when development is complete, which generally occurs upon regulatory approval, and the Company is able to commercialize products associated with the IPR&D assets, these assets are then deemed definite-lived and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value. The IPR&D was acquired on September 21, 2015. No impairment existed at December 31, 2015.

Property and Equipment

Property and equipment consists primarily of machinery, manufacturing equipment, computer equipment, furniture, and leasehold improvements, which are recorded at cost.

Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:


Machinery and manufacturing equipment		3-5 years
Computer equipment		3 years
Furniture		5 years
Leasehold improvements		Lesser of lease term or 3 to 10 years

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is credited or charged to operations. Repairs and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company evaluates the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the assets. If such estimated cash flows are less than the carrying amount of the long-lived assets, then such assets are written down to their fair value. The Company’s estimates of anticipated cash flows and the remaining estimated useful lives of long-lived assets could be reduced in the future, resulting in a reduction to the carrying amount of long-lived assets.

Contingent Consideration

Contingent consideration is recorded as a liability and is the estimate of the fair value of potential milestone payments related to business acquisitions. Contingent consideration is measured at fair value using a discounted cash flow model utilizing significant unobservable inputs including the probability of achieving each of the potential milestones and an estimated discount rate associated with the risks of the expected cash flows attributable to the various milestones. Significant increases or decreases in any of the probabilities of success or changes in expected timelines for achievement of any of these milestones would result in a significantly higher or lower fair value of these milestones, respectively, and commensurate changes to the associated liability. The fair value of the contingent consideration at each reporting date is updated by reflecting the changes in fair value in our statement of operations and comprehensive loss.

Translation of Foreign Currencies

The functional currency of the Company’s foreign subsidiary, TransEnterix Italia, is its local currency. The assets and liabilities of the Company’s foreign subsidiary are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effect for a subsidiary using a functional currency other than the U.S. dollar is included in accumulated other comprehensive income or loss as a separate component of stockholders’ equity.

The Company’s intercompany accounts are denominated in the functional currency of the foreign subsidiary. Gains and losses resulting from the remeasurement of intercompany receivables that the Company considers to be of a long-term investment nature are recorded as a cumulative translation adjustment in accumulated other comprehensive income or loss as a separate component of stockholders’ equity, while gains and losses resulting from the remeasurement of intercompany receivables from a foreign subsidiary for which the Company anticipates settlement in the foreseeable future are recorded in the consolidated statement of operations and comprehensive loss. The net gains and losses included in net loss in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2015 were not significant.

Business Acquisitions

Business acquisitions are accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations.” ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values, as determined in accordance with ASC 820, “Fair Value Measurements,” as of the acquisition date. For certain assets and liabilities, book value approximates fair value. In addition, ASC 805 establishes that consideration transferred be measured at the closing date of the acquisition at the then-current market price, which may be different than the amount of consideration assumed in the pro forma financial statements. Under ASC 805, acquisition related costs (i.e., advisory, legal, valuation and other professional fees) and certain acquisition-related restructuring charges impacting the target company are expensed in the period in which the costs are incurred. The application of the acquisition method of accounting requires the Company to make estimates and assumptions related to the estimated fair values of net assets acquired.

Significant judgments are used during this process, particularly with respect to intangible assets. Generally, intangible assets are amortized over their estimated useful lives. Goodwill and other indefinite-lived intangibles are not amortized, but are annually assessed for impairment. Therefore, the purchase price allocation to intangible assets and goodwill has a significant impact on future operating results.

Risk and Uncertainties

The Company is subject to a number of risks similar to other similarly-sized companies in the medical device industry. These risks include, without limitation, the historical lack of profitability; the Company’s ability to raise additional capital; its ability to successfully integrate the ALF-X System into its business; its ability to successfully develop, clinically test and commercialize its products; the timing and outcome of the regulatory review process for its products; changes in the health care and regulatory environments of the United States, Italy and other countries in which the Company intends to operate; its ability to attract and retain key management, marketing and scientific personnel; competition from new entrants; its ability to successfully prepare, file, prosecute, maintain, defend and enforce patent claims and other intellectual property rights; its ability to successfully transition from a research and development company to a marketing, sales and distribution concern; competition in the market for robotic surgical devices; and its ability to identify and pursue development of additional products.

Preferred Stock Warrant Liability

In January and December 2012, TransEnterix Surgical entered into promissory notes with two lenders and issued preferred stock warrants to each lender in connection with the issuance of the promissory notes. At December 31, 2012, TransEnterix Surgical accounted for these free standing warrants to purchase TransEnterix Surgical Series B-1 Convertible Preferred Stock as liabilities at fair value. The warrants were subject to re-measurement at each balance sheet date prior to the Merger, and the change in fair value through the Merger date was recognized as other income (expense). TransEnterix Surgical used the Monte Carlo simulation method to value the warrants prior to the Merger which is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of TransEnterix Surgical’s future expected stock prices and minimizes standard error. In connection with the Merger, the warrants, which previously were convertible into shares of TransEnterix Surgical Series B-1 Convertible Preferred Stock, were amended to be convertible into warrants to purchase the Company’s common stock. Upon conversion of the warrants as a consequence of the Merger, the preferred stock warrant liability was reclassified into additional paid-in capital.

Revenue Recognition

Revenue from product sales is recognized when persuasive evidence of an arrangement exists, delivery has occurred which is typically at shipping point, the fee is fixed or determinable and collectability is reasonably assured. Shipping and handling costs billed to customers are included in revenue.

Cost of Goods Sold

Cost of goods sold consists of materials, labor and overhead incurred internally to produce the products. Shipping and handling costs incurred by the Company are included in cost of goods sold.

Research and Development Costs

Research and development expenses primarily consist of engineering, product development and regulatory expenses, incurred in the design, development, testing and enhancement of our products and legal services associated with our efforts to obtain and maintain broad protection for the intellectual property related to our products. Research and development costs are expensed as incurred.

Stock-Based Compensation

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

The Company recognizes compensation expense for stock-based awards based on estimated fair values on the date of grant for awards granted to employees. The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock options. The fair value of other stock-based compensation awards is determined by the market price of the Company’s common stock on the date of grant. The expense associated with stock-based compensation is recognized on a straight-line basis over the requisite service period of each award.

The Company records as expense the fair value of stock-based compensation awards, including stock options and restricted stock units. Compensation expense for stock-based compensation was approximately $3,311,000, $1,840,000 and $941,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets or liabilities for the temporary differences between financial reporting and tax basis of the Company’s assets and liabilities, and for tax carryforwards at enacted statutory rates in effect for the years in which the asset or liability is expected to be realized. The effect on deferred taxes of a change in tax rates is recognized in income during the period that includes the enactment date. In addition, valuation allowances are established when necessary to reduce deferred tax assets and liabilities to the amounts expected to be realized.

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Segments

The Company operates in one business segment—the research, development and sale of medical device robotics to improve minimally invasive surgery. The Company’s chief operating decision maker (determined to be the Chief Executive Officer) does not manage any part of the Company separately, and the allocation of resources and assessment of performance are based on the Company’s consolidated operating results. Approximately 57% of the Company’s total consolidated assets are located within the U.S. as of December 31, 2015. The remaining assets are mostly located in Europe and are primarily related to the Company’s ALF-X System facility in Italy, and include goodwill, intellectual property, in-process research and development and inventory of $106.3 million at December 31, 2015, associated with the ALF-X Acquisition in September 2015. Total assets outside of the U.S. excluding goodwill amounted to 28% of total consolidated assets at December 31, 2015. There were no assets outside the U.S. as of December 31, 2014. For the years ended December 31, 2015, 2014, and 2013, 0%, 90%, and 60%, respectively, of net revenue were generated in the United States.

Impact of Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.

The updated guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the Standard in 2018.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). The amendments in ASU 2014-15 are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under U.S. GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, U.S. GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. This update is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company does not expect this ASU will have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, rather than an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. Upon adoption, this guidance requires retrospective application. The Company early adopted this standard for the year ended December 31, 2015. Although the new guidance had no impact on the Company’s results of operations, the debt issuance costs presented as assets within the Company’s consolidated balance sheet as of December 31, 2014 of $100,000 has been reclassified as a reduction of the related debt liability.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory (Topic 330). This update requires inventory within the scope of the standard to be measured at the lower of cost and net realizable value. Previous guidance required inventory to be measured at the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin). This update is effective for annual and interim periods beginning after December 15, 2016, which will require us to adopt these provisions in the first quarter of fiscal year 2017. Early adoption is permitted. The Company is currently evaluating the impact the guidance will have on our consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments (ASU 2015-16), which replaces the requirement that an acquirer in a business combination account for measurement period adjustments retrospectively with a requirement that an acquirer recognize adjustments to the provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU 2015-16 requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. For public business entities, ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The guidance is to be applied prospectively to adjustments to provisional amounts that occur after the effective date of the guidance, with earlier application permitted for financial statements that have not been issued. Our early adoption of ASU 2015-16 in the third quarter of 2015 did not have a material impact on our consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The new standard requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual report period. The amendments in this ASU may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. We adopted this standard as of December 31, 2015 with prospective application. As a result, we reclassified our deferred tax assets classified as current to noncurrent and our deferred tax liabilities classified as current to noncurrent in our December 31, 2015 consolidated balance sheet. Prior balance sheets were not retrospectively adjusted.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company does not believe the adoption of this guidance will have a material impact on its consolidated financial statements or related footnote disclosures.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

Reclassifications

As a result of a recent acquisition, certain financial statement captions have been added and we have reclassified certain prior-period amounts on our consolidated statement of operations and comprehensive loss to conform to the presentation for the current period. Such reclassifications have no effect on previously reported total assets, liabilities, stockholders’ equity or net loss.

As previously disclosed, in April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This guidance requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, rather than an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. Upon adoption, this guidance requires retrospective application. The Company early adopted this standard for the year ended December 31, 2015. Although the new guidance had no impact on the Company’s results of operations, the debt issuance costs presented as assets within the Company’s consolidated balance sheet as of December 31, 2014 of $100,000 has been reclassified as a reduction of the related debt liability.

Acquisition of ALF-X Surgical Robotic System/ Closing of 2013 Merger and Financing Transaction

12 Months Ended

Dec. 31, 2015

Acquisition of ALF-X Surgical Robotic System/ Closing of 2013 Merger and Financing Transaction

18.

Closing of 2013 Merger and Financing Transaction

Pursuant to an Agreement and Plan of Merger dated August 13, 2013, as amended by a First Amendment dated August 30, 2013 (collectively, the “Merger Agreement”), on September 3, 2013, the Company consummated the Merger in which a wholly owned subsidiary of SafeStitch merged with TransEnterix Surgical. Under the terms of the Merger Agreement, TransEnterix Surgical remained as the surviving corporation and as a wholly owned subsidiary of SafeStitch.

Pursuant to the Merger Agreement, each share of TransEnterix Surgical’s capital stock issued and outstanding immediately preceding the Merger was converted into the right to receive 1.1533 shares of the Company’s common stock, par value $0.001 per share, other than those shares of TransEnterix Surgical’s common stock held by non-accredited investors, which shares were instead converted into the right to receive an amount in cash per share of SafeStitch common stock equal to $1.08, without interest, which was the volume-weighted average price of a share of common stock on the OTCBB for the 60-trading day period ended on August 30, 2013 (one business day prior to the effective date of the Merger). Upon the closing of the Merger, and in accordance with the terms of the Merger Agreement, the Company issued an aggregate of 21,109,949 shares of the Company’s common stock as Merger consideration and paid $293,000 to unaccredited investors in lieu of common stock. Additionally, pursuant to the Merger Agreement, upon consummation of the Merger, the Company assumed all of TransEnterix Surgical’s options, whether vested or unvested, and warrants issued and outstanding immediately prior to the Merger at the same Exchange Ratio.

During July 2013, TransEnterix Surgical issued promissory notes (the “Bridge Notes”) to related parties consisting of existing investors of TransEnterix Surgical, in the aggregate principal amount of $2.0 million, as contemplated by the Merger Agreement. The Bridge Notes bore interest at a rate of 8% per annum. The Bridge Notes were not secured by any collateral and were subordinated in right of payment to the loan evidenced by the Original Loan Agreement. The Bridge Notes were converted into Series B Preferred Stock of the Company at the effective time of the Merger.

Concurrent with the closing of the Merger, and in accordance with the terms of the Securities Purchase Agreement, the Company consummated a private placement (the “Private Placement”) transaction in which it issued and sold shares of its Series B Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”) to provide funding to support the Company’s operations following the Merger. The Private Placement was done pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”) with accredited investors (the “Investors”), the majority of which were considered related parties as existing investors in SafeStitch or TransEnterix Surgical. Under the Securities Purchase Agreement, the Company issued 7,544,704.4 shares of Series B Preferred Stock, each share of which is convertible, subject to certain conditions, into two shares of common stock, for a purchase price of $4.00 per share of Series B Preferred Stock, which was paid in cash, cancellation of certain Bridge Notes of TransEnterix Surgical or a combination thereof. Pursuant to the Securities Purchase Agreement, the Company issued and sold an additional 25,000 shares of Series B Preferred Stock within the period provided in the Securities Purchase Agreement resulting in gross proceeds to the Company of approximately $100,000. Each share of Series B Preferred Stock was converted into two shares of our common stock, par value $0.001 per share, on December 6, 2013.

In connection with the Merger Agreement and the September 2013 private placement, certain of SafeStitch’s and TransEnterix Surgical’s former stockholders, comprising approximately 93% of our stock on the effective date of the Merger, entered into Lock-up and Voting Agreements, pursuant to which such persons agreed, subject to certain exceptions, not to sell, transfer or otherwise convey any of the Company’s securities held by them (collectively, “Covered Securities”) for one year following the September 3, 2013 closing date (the “Merger Closing Date”). The Lock-up and Voting Agreements provide that such persons may sell, transfer or convey: (i) up to 50% of their respective Covered Securities during the period commencing on the one-year anniversary of the Merger Closing Date and ending on the eighteen-month anniversary of the Merger Closing Date; and (ii) up to an aggregate of 75% of their respective Covered Securities during the period commencing on the eighteen-month anniversary of the Merger Closing Date and ending on the two-year anniversary of the Merger Closing Date. The restrictions on transfer contained in the Lock-up and Voting Agreements ceased to apply to the Covered Securities on September 3, 2015.

At the closing of the Merger, each outstanding share of capital stock of TransEnterix Surgical was cancelled and extinguished and converted into the right to receive a portion of the Merger consideration in accordance with the Merger Agreement. The Bridge Notes were terminated at the closing of the Merger, and the holders of such Bridge Notes received Merger consideration in accordance with the Merger Agreement.

The Merger effectuated on September 3, 2013 qualified as a tax-free reorganization under Section 368 of the Internal Revenue Code. As a result of the Merger, the utilization of certain tax attributes of the Company may be limited in future periods under the rules prescribed under Section 382 of the Internal Revenue Code.

The Company’s assets and liabilities are presented at their preliminary estimated fair values, with the excess of the purchase price over the sum of these fair values presented as goodwill.

The following table summarizes the purchase price (in thousands):


Common shares outstanding at the date of Merger		12,350
Closing price per share	$	7.60

	$	93,858

Cash consideration		293

Total consideration	$	94,151

The purchase price was allocated to the net assets acquired utilizing the methodology prescribed in ASC 805. The Company recorded goodwill of $93.8 million after recording net assets acquired at fair value as presented in the following table.

The following table summarizes the allocation of the purchase price to the net assets acquired (in thousands):


Cash and cash equivalents	$	597
Accounts receivable		54
Inventory		50
Other current assets		53
Property and equipment		185
Other long-term asset		2
Intangible assets		10
Goodwill		93,842

Total assets acquired	$	94,793

Accounts payable and other liabilities		642

Net assets acquired	$	94,151

Following the announcement of the Merger, the SafeStitch stock price increased prior to the Merger closing date of September 3, 2013, generating additional goodwill. There may be impairment in the future and the impairment of goodwill will be assessed annually.

The Company allocated $10,000 of the purchase price to identifiable intangible assets of trade names that met the separability and contractual legal criterion of ASC 805. The trade names will be amortized using the straight-line method over 5 years.

The results of operations of SafeStitch have been included in the Company’s consolidated financial statements from the date of the Merger.

ALF-X Surgical Robotic System Acquisition [Member]

Acquisition of ALF-X Surgical Robotic System/ Closing of 2013 Merger and Financing Transaction

3.	Acquisition of ALF-X Surgical Robotic System

On September 21, 2015, the Company completed the strategic acquisition, through its wholly owned subsidiary TransEnterix International, from SOFAR, of all of the assets, employees and contracts related to the advanced robotic system for minimally invasive laparoscopic surgery known as the ALF-X System and changed the name of the acquired company from Vulcanos S.r.l. to TransEnterix Italia S.r.l.

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

(1) $25.0 million of the Cash Consideration was paid at closing;

(2) The second tranche of the Cash Consideration (the “Second Tranche”) of €10 million shall be payable after the achievement of both of the following milestones (i) the earlier of approval from the FDA for the ALF-X System or December 31, 2016, and (ii) the Company having cash on hand of at least $50.0 million, or successfully completing a financing, raising at least $50.0 million in gross proceeds; with payment of simple interest at a rate of 9.0% per annum between the achievement of the first milestone event and the payment date;

(3) The third tranche of the Cash Consideration (the “Third Tranche”) of €15.0 million shall be payable upon achievement of trailing revenues from sales or services contracts of the ALF-X System of at least €25.0 million over a calendar quarter; and

(4) The fourth tranche of the Cash Consideration of €2.5 million shall be payable by December 31, 2016 as reimbursement for certain debt payments made by SOFAR under an existing SOFAR loan agreement.

The Third Tranche will be payable even if the Second Tranche is not then payable. In addition, the Second Tranche and Third Tranche payments will be accelerated in the event that (i) the Company or TransEnterix International is acquired, (ii) the Company significantly reduces or suspends selling efforts of the ALF-X System, or (iii) the Company acquires a business that offers alternative products that are directly competitive with the ALF-X System.

Under the Purchase Agreement, 10% of the Securities Consideration is being held in escrow to support SOFAR’s representations and warranties under the Purchase Agreement. The Company and SOFAR also entered into a Security Agreement, which provides that 10% of the membership interests of TransEnterix Italia have a lien placed thereon by and in favor of SOFAR to support the Company’s representations and warranties under the Purchase Agreement. The escrow period and security interest period are each twenty-four months after the closing of the ALF-X Acquisition.

The Purchase Agreement contains customary representations and warranties of the parties and the parties have customary indemnification obligations, which are subject to certain limitations described further in the Purchase Agreement.

In connection with the ALF-X Acquisition, the Company also entered into a Registration Rights Agreement, dated as of September 21, 2015, with SOFAR, pursuant to which the Company agreed to register the Securities Consideration shares for resale following the end of the lock-up periods described below.

In connection with the ALF-X Acquisition, SOFAR entered into a Lock-Up Agreement with the Company pursuant to which SOFAR agreed, subject to certain exceptions, not to sell, transfer or otherwise convey any of the Securities Consideration for one year following the Closing Date. The Lock-up Agreement provides that SOFAR may sell, transfer or convey: (i) no more than 50% of the Securities Consideration during the period commencing on the one-year anniversary of the Closing Date and ending on the eighteen-month anniversary of the Closing Date; and (ii) no more than 75% of the Securities Consideration during the period commencing on the eighteen-month anniversary of the Closing Date and ending on the two-year anniversary of the Closing Date. The restrictions on transfer contained in the Lock-up Agreement cease to apply to the Securities Consideration following the second anniversary of the Closing Date, or earlier upon certain other conditions.

The ALF-X Acquisition was accounted for as a business combination utilizing the methodology prescribed in ASC 805. The purchase price for the ALF-X Acquisition has been allocated to the assets acquired and liabilities assumed based on their estimated fair values. The purchase price allocation presented herein has been updated since September 30, 2015 and is preliminary as the Company is finalizing its compilation and review of certain market data used in the valuation of the intangible assets acquired. The final purchase price allocation will be determined after completion of this analysis to determine the fair value of all assets acquired and liabilities assumed, but in no event later than one year following completion of the ALF-X Acquisition. Accordingly, the final acquisition accounting adjustments could differ materially from the preliminary amounts presented herein. Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change the portion of purchase price allocated to goodwill, and could impact the operating results of the Company following the acquisition due to differences in purchase price allocation, depreciation and amortization related to some of these assets and liabilities.

The ALF-X Acquisition-date fair value of the consideration is as follows (in thousands, except for per share amounts):


Common shares issued		15,543
Closing price per share	$	2.81

	$	43,677

Cash consideration		25,000

Contingent consideration		23,900

Total consideration	$	92,577

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on September 21, 2015, the date of acquisition (in thousands):


Accounts receivable	$	78
Inventories		2,800
Current deferred tax asset		526
Other current assets		4,180
Property and equipment		1,384
Intellectual property		48,500
In-process research and development		17,100
Goodwill		38,348

Total assets acquired	$	112,916

Accounts payable and other liabilities		1,915
Long-term deferred tax liabilities		18,424

Net assets acquired	$	92,577

The Company allocated $48.5 million of the preliminary purchase price to identifiable intangible assets of intellectual property that met the separability and contractual legal criterion of ASC 805. The intellectual property will be amortized using the straight-line method over 7 years.

IPR&D is principally the estimated fair value of the ALF-X System technology which had not reached commercial technological feasibility nor had alternative future use at the time of the acquisition and therefore the Company considered IPR&D, with assigned values to be allocated among the various IPR&D assets acquired.

Goodwill is calculated as the difference between the acquisition-date fair value of the consideration transferred and the fair values of the assets acquired and liabilities assumed. The goodwill resulting from this acquisition arises largely from synergies expected from combining the operations of TransEnterix Italia with the Company’s existing operations. The goodwill is not deductible for income tax purposes.

All legal, consulting and other costs related to the acquisition, aggregating approximately $4.2 million, have been expensed as incurred and are included in operating expenses in the Company’s consolidated statements of operations and comprehensive loss. The results of operations for TransEnterix Italia are included in the Company’s consolidated statements of operations and comprehensive loss for the period from the September 21, 2015 acquisition date to December 31, 2015. The Company has no revenues and incurred $2.5 million in net losses from September 21, 2015 through December 31, 2015 associated with the operations of TransEnterix Italia.

The following unaudited pro forma information presents the combined results of operations for the years ended December 31, 2015 and 2014, as if the Company had completed the ALF-X Acquisitions at the beginning of fiscal 2014. The pro forma financial information is provided for comparative purposes only and is not necessarily indicative of what actual results would have been had the acquisition occurred on the date indicated, nor does it give effect to synergies, cost savings, fair market value adjustments, immaterial amortization expense and other changes expected to result from the acquisition. Accordingly, the pro forma financial results do not purport to be indicative of consolidated results of operations as of the date hereof, for any period ended on the date hereof, or for any other future date or period. The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for transaction-related costs and amortization of intellectual property.


	Year Ended December 31,
	2015		2014
	(In thousands except per share amounts)
Revenue	$	77	$	401
Net loss		53,994		46,874
Net loss per share	$	0.57	$	0.63

Cash and Cash Equivalents [Abstract]

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1490-128463

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
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-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
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-Section 50
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4845-128472

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1500-128463

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1524-128463

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
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-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
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-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4922-128472

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-Publisher FASB
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-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4934-128472

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4926-128472

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
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-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1383-128463

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Cash, Cash Equivalents, Restricted Cash and Short-Term Investments

12 Months Ended

Dec. 31, 2015

Cash, Cash Equivalents, Restricted Cash and Short-Term Investments

4.	Cash, Cash Equivalents, Restricted Cash and Short-Term Investments

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


	December 31,
	2015		2014
	(In thousands)
Cash	$	1,666	$	1,511
Money market		36,783		33,255

Total cash and cash equivalents	$	38,449	$	34,766

Restricted cash	$	—	$	250

Total	$	38,449	$	35,016

Restricted cash, consisting of a money market account used as collateral securing a letter of credit under the terms of the corporate office operating lease that commenced in 2010 and expired in April 2015, was $0 and $250,000 as of December 31, 2015 and December 31, 2014, respectively.

The Company held no investments at December 31, 2015 and 2014 as it sold all its investment securities during 2014. There were no realized gains or losses for the years ended December 31, 2015, 2014 or 2013. There have been no unrealized gains or losses reclassified to accumulated other comprehensive loss.

The entire disclosure for cash and cash equivalent footnotes, which may include the types of deposits and money market instruments, applicable carrying amounts, restricted amounts and compensating balance arrangements. Cash and equivalents include: (1) currency on hand (2) demand deposits with banks or financial institutions (3) other kinds of accounts that have the general characteristics of demand deposits (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments maturing within three months from the date of acquisition qualify.

Fair Value

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value

5.	Fair Value

The Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis. These assets and liabilities include available for sale securities classified as cash equivalents and contingent consideration. ASC 820-10 (“Fair Value Measurement Disclosure”) requires the valuation using a three-tiered approach, which requires that fair value measurements be classified and disclosed in one of three tiers. These tiers are: Level 1, defined as quoted prices in active markets for identical assets or liabilities; Level 2, defined as valuations based on observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable input data; and Level 3, defined as valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data and therefore, are based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

As prescribed by U.S. GAAP, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. An adjustment to the pricing method used within either Level 1 or Level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy.

The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures and based on various factors, it is possible that an asset or liability may be classified differently from period to period. However, the Company expects changes in classifications between levels will be rare.

The carrying values of accounts receivable, inventories, interest receivable, accounts payable, and certain accrued expenses at December 31, 2015 and 2014, approximate their fair values due to the short-term nature of these items. The Company’s notes payable balance also approximates fair value as of December 31, 2015 and 2014, as they were modified in each of the years.

The following are the major categories of assets measured at fair value on a recurring basis as of December 31, 2015 and 2014, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):


	December 31, 2015
	(In thousands)
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets measured at fair value
Cash and Cash Equivalents	$	38,449	$	—	$	—	$	38,449

Total Assets measured at fair value	$	38,449	$	—	$	—	$	38,449

Liabilities measured at fair value
Contingent consideration	$	—	$	—	$	23,500	$	23,500

Total liabilities measured at fair value	$	—	$	—	$	23,500	$	23,500


	December 31, 2014
	(In thousands)
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets measured at fair value
Cash and Cash Equivalents	$	34,766	$	—	$	—	$	34,766
Restricted Cash		250		—		—		250

Total Assets measured at fair value	$	35,016	$	—	$	—	$	35,016

The Company’s financial liabilities consisted of contingent consideration potentially payable to SOFAR related to the ALF-X acquisition in September 2015 (Note 3). This liability is reported as Level 3 as estimated fair value of the contingent consideration related to the acquisition requires significant management judgment or estimation and is calculated using the income approach, using various revenue and cost assumptions and applying a probability to each outcome. The change in fair value of the contingent consideration of $0.4 million for the year ended December 31, 2015 was primarily due to the foreign currency changes on the fair value measurement of milestones related to the ALF-X acquisition. Adjustments associated with the change in fair value of contingent consideration are included in the Company’s consolidated statements of operations and comprehensive loss.

The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements classified in Level 3 as of September 21, 2015 and December 31, 2015:


	Valuation Methodology	Significant Unobservable Input	Weighted Average (range, if applicable)
Contingent consideration	Probability weighted income approach	Milestone dates	2016 to 2017
		Discount rate Probability of occurrence	7.5% to 9.0% 100%

The following table summarizes the change in fair value, as determined by Level 3 inputs, for all assets and liabilities using unobservable Level 3 inputs for the years ended December 31, 2015, 2014 and 2013:


	Fair Value Measurement at Reporting Date (Level 3)
	(In thousands)
Balance at December 31, 2012	$	109
Change in fair value of preferred stock warrant liability recorded in other expense		1,800
Reclassification to additional paid-in capital upon the Merger		(1,909	)

Balance at December 31, 2013	$	—
Additions		—

Balance at December 31, 2014	$	—
Additions for contingent consideration		23,900
Change in fair value		(400	)

Balance at December 31, 2015	$	23,500

Current portion		12,500
Long-term portion		11,000

Balance at December 31, 2015	$	23,500

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Accounts Receivable, Net

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Accounts Receivable, Net

6.	Accounts Receivable, Net

The following table presents the components of accounts receivable:


	December 31,
	2015		2014
	(In thousands)
Gross accounts receivable	$	76	$	221
Allowance for uncollectible accounts		—		(88	)

Total accounts receivable, net	$	76	$	133

Inventories

12 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Inventories

7.	Inventories

The components of inventories are as follows:


	December 31,
	2015		2014
	(In thousands)
Finished goods	$	2,704	$	358
Raw materials		1,928		—
Reserve for excess and obsolete inventory		—		(358	)

Total inventories	$	4,632	$	—

Short-term portion	$	3,923	$	—
Long-term portion		709		—

Total inventories	$	4,632	$	—

During 2014, the Company discontinued the sale of the SPIDER System. As a result, the inventory balance was fully reserved at December 31, 2014.

Other Current Assets

12 Months Ended

Dec. 31, 2015

Other Current Assets

8.	Other Current Assets

The following table presents the components of other current assets:


	December 31,
	2015		2014
	(In thousands)
Advances to vendors	$	5,403	$	—
Prepaid expenses		750		608
Other receivables		536		132

Total	$	6,689	$	740

Property and Equipment

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment

9.	Property and Equipment

Property and equipment consisted of the following:


	December 31,
	2015			2014
	(In thousands)
Machinery and manufacturing equipment	$	5,846		$	3,797
Computer equipment		1,875			1,710
Furniture		374			358
Leasehold improvements		1,700			1,405

Total property and equipment		9,795			7,270
Accumulated depreciation and amortization		(5,387	)		(4,150	)

Property and equipment, net	$	4,408		$	3,120

Depreciation expense was $1,248,000, $807,000 and $983,000, for the years ended December 31, 2015, 2014 and 2013, respectively.

During the year ended December 31, 2013, an impairment charge of $450,000 was incurred for a charge in the estimate of the useful lives for certain manufacturing property and equipment that the Company does not anticipate using in the future.

Goodwill, In-Process Research and Development and Intellectual Property

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, In-Process Research and Development and Intellectual Property

10.

Goodwill, In-Process Research and Development and Intellectual Property

Goodwill

Goodwill of $93.8 million was recorded in connection with the Merger, as discussed in Note 18, and goodwill of $38.3 million was recorded in connection with the ALF-X Acquisition, as discussed in Note 3. The carrying value of goodwill and the change in the balance for the years ended December 31, 2015 and 2014 is as follows:


	Goodwill
	(In thousands)
Balance at December 31, 2013	$	93,842
Additions		—

Balance at December 31, 2014		93,842
Additions		38,348
Foreign currency translation impact		(1,321	)

Balance at December 31, 2015	$	130,869

The Company has no accumulated impairment losses on goodwill. The Company performed a qualitative assessment during the annual impairment review for fiscal 2015 as of December 31, 2015 and concluded that it is not more likely than not that the fair value of the Company’s single reporting unit is less than its carrying amount. Therefore, the two-step goodwill impairment test for the reporting unit was not necessary in fiscal 2015.

In-Process Research and Development

As described in Note 3, on September 21, 2015, the Company acquired all of the assets related to the ALF-X System and recorded $17.1 million of IPR&D. The estimated fair value of the IPR&D was determined using a probability-weighted income approach, which discounts expected future cash flows to present value. The projected cash flows were based on certain key assumptions, including estimates of future revenue and expenses, taking into account the stage of development of the technology at the acquisition date and the time and resources needed to complete development. The Company used a discount rate of 45% and cash flows that have been probability adjusted to reflect the risks of product commercialization, which the Company believes are appropriate and representative of market participant assumptions.

The carrying value of the Company’s IPR&D assets and the change in the balance for the year ended December 31, 2015 is as follows:


	In-Process Research and Development
	(In thousands)
Balance at December 31, 2014	$	—
Additions		17,100
Foreign currency translation impact		(589	)

Balance at December 31, 2015	$	16,511

Intellectual Property

In 2009, the Company purchased certain patents from an affiliated company for $5 million in cash and concurrently terminated a license agreement related to the patents. The patent expiration dates begin in 2027. In addition, as described in Note 3, on September 21, 2015, the Company acquired all of the developed technology related to the ALF-X System and recorded $48.5 million of intellectual property. The estimated fair value of the intellectual property was determined using a probability-weighted income approach, which discounts expected future cash flows to present value. The projected cash flows were based on certain key assumptions, including estimates of future revenue and expenses, taking into account the stage of development of the technology at the acquisition date and the time and resources needed to complete development. The Company used a discount rate of 45% and cash flows that have been probability adjusted to reflect the risks of product commercialization, which the Company believes are appropriate and representative of market participant assumptions.

The components of gross intellectual property, accumulated amortization, and net intellectual property as of December 31, 2015, and 2014 as follows:


	December 31, 2015										December 31, 2014
	(In thousands)										(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
Patents	$	5,000	$	(3,259	)	$	—		$	1,741	$	5,000	$	(2,759	)	$	—	$	2,241

Developed technology		48,500		(1,672	)		(1,671	)		45,157		—		—			—		—

Total intellectual property	$	53,500	$	(4,931	)	$	(1,671	)	$	46,898	$	5,000	$	(2,759	)	$	—	$	2,241

The estimated future amortization expense of intangible assets as of December 31, 2015 is as follows:


	Amount
Fiscal Year	(In thousands)
2016	$	7,429
2017		7,429
2018		7,429
2019		7,170
2020		6,929
Thereafter		10,512

Total	$	46,898

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

11.

Income Taxes

The components for the income tax expense (benefit) are as follows for the years ended December 31 (in thousands):


	2015			2014		2013
Current income taxes
Federal	$	—		$	—	$	—
State		—			—		—
Foreign		—			—		—
Deferred income taxes
Federal		—			—		—
State		—			—		—
Foreign		(1,024	)		—		—

Total income tax expense (benefit)	$	(1,024	)	$	—	$	—

The United States and foreign components of loss from operations before taxes are as follows for the years ended December 31 (in thousands):


	2015			2014			2013
United States	$	(44,438	)	$	(37,652	)	$	(28,358	)
Foreign		(3,534	)		—			—

Total loss from operations before taxes	$	(47,972	)	$	(37,652	)	$	(28,358	)

Significant components of the Company’s deferred tax assets consist of the following at December 31 (in thousands):


	2015			2014
Current deferred tax assets:
Inventory reserves	$	—		$	537
Accrued expenses		—			373
Deferred rent		—			17
Allowance for uncollectible accounts receivable		—			32

Valuation allowance		—			(959	)

Net current deferred tax asset		—			—

Noncurrent deferred tax assets:
Stock-based compensation		1,543			1,154
Inventory		1,819			—
Accrued expenses and other		936			—
Contribution carryforward		2			2
Research credit carryforward		4,224			3,200
Fixed assets		275			278
Capitalized start-up costs and other intangibles		3,864			4,233
Net operating loss carryforwards		64,867			51,145

		77,530			60,012
Valuation allowance		(75,897	)		(60,009	)

Net noncurrent deferred tax asset		1,633			3

Noncurrent deferred tax liabilities

Fixed assets		(973	)		—
Purchase accounting intangibles		(16,923	)		(3	)

Net noncurrent deferred tax liability		(17,896	)		—

Net deferred tax asset (liability)	$	(16,263	)	$	—

The transaction described in Note 3 was a nontaxable transaction according to ASC 740, and the goodwill recorded under U.S. GAAP purchase accounting is not deductible for tax purposes.

At December 31, 2015 and 2014, the Company has provided a full valuation allowance against its net deferred assets in the US tax jurisdiction, since realization of these benefits is not more likely than not. The valuation allowance increased approximately $14.9 million from the prior year. At December 31, 2015, the Company had federal and state net operating loss tax carryforwards of approximately $178.1 million and $133.7 million, respectively. These net operating loss carryforwards expire in various amounts starting in 2027 and 2018, respectively. The Company’s federal and state net operating loss carryforwards include approximately $0.9 million of excess tax benefits related to deductions from the exercise of stock options. The tax benefit of these deductions has not been recognized in deferred tax assets. If utilized, the benefits from these deductions will be recorded as adjustments to additional paid-in capital. At December 31, 2015, the Company had federal research credit carryforwards in the amount of $4.2 million. These carryforwards begin to expire in 2027. The utilization of the federal net operating loss carryforwards and credit carryforwards will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the carryforwards. In addition, the maximum annual use of net operating loss and research credit carryforwards is limited in certain situations where changes occur in stock ownership. At December 31, 2015, the Company had foreign operating loss carryforwards of approximately $2.1 million, which can be carried forward indefinitely. The Company has no unremitted foreign earnings as of December 31, 2015.

The Company has evaluated its tax positions to consider whether it has any unrecognized tax benefits. As of December 31, 2015 the Company had gross unrecognized tax benefits of approximately $0.8 million. Of the total, none would reduce the Company’s effective tax rate if recognized. The Company does not anticipate a significant change in total unrecognized tax benefits or the Company’s effective tax rate due to the settlement of audits or the expiration of statutes of limitations within the next twelve months. Furthermore, the Company does not expect any cash settlement with the taxing authorities as a result of these unrecognized tax benefits as the Company has sufficient unutilized carryforward attributes to offset the tax impact of these adjustments.

The following is a tabular reconciliation of the Company’s change in gross unrecognized tax positions at December 31 (in thousands):


	2015		2014		2013
Beginning balance	$	606	$	—	$	—
Gross increases for tax positions related to current periods		256		606		—
Gross increases for tax positions related to prior periods		—		—		—

Ending balance	$	862	$	606	$	—

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2015 and 2014, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company has analyzed its filing positions in all significant federal, state, and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. With few exceptions, the Company is no longer subject to United States Federal, state, and local tax examinations by tax authorities for years before 2012, although carryforward attributes that were generated prior to 2012 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period. No income tax returns are currently under examination by taxing authorities.

Taxes computed at the statutory federal income tax rate of 34% are reconciled to the provision for income taxes as follows for the years ended December 31:


	2015						2014						2013
	Amount			% of Pretax Earnings			Amount			% of Pretax Earnings			Amount			% of Pretax Earnings
United States federal tax at statutory rate	$	(16,311	)		34.0	%	$	(12,801	)		34.0	%	$	(9,642	)		34.0	%
State taxes (net of deferred benefit)		(1,121	)		2.3	%		(786	)		2.0	%		(662	)		2.3	%
Nondeductible expenses		1,797			(3.7	%)		253			(0.7	%)		1,556			(5.5	%)
Research & Development credits		(1,281	)		2.7	%		(1,532	)		4.1	%		—			0.0	%
Change in unrecognized tax benefits		256			(0.5	%)		606			(1.6	%)		—			0.0	%
Foreign tax rate differential		175			(0.4	%)		—			0.0	%		—			0.0	%
Adjustment for valuation allowance as part of purchase accounting		—			0.0	%		—			0.0	%		(11,785	)		41.6	%
Other, net		532			(1.2	%)		392			(1.0	%)		(200	)		0.7	%
Change in valuation allowance		14,929			(31.1	%)		13,868			(36.8	%)		20,733			(73.1	%)

Income tax benefit	$	(1,024	)		2.1	%	$	—			0.0	%	$	—			0.0	%

Accrued Expenses

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Accrued Expenses

12.

Accrued Expenses


	December 31,
	2015		2014
	(In thousands)
Taxes and other assessments	$	3,112	$	189
Compensation and benefits		2,492		1,036
Legal and professional fees		268		145
Consulting and other vendors		553		208
Interest and final payment fee		411		131
Deferred rent		278		46
Other		281		14

Total	$	7,395	$	1,769

Notes Payable

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Notes Payable

13.

Notes Payable

On January 17, 2012, TransEnterix Surgical entered into a loan and security agreement with Silicon Valley Bank and Oxford Finance LLC (the “Lenders”). The terms of the Original Loan Agreement provided for two term loans in aggregate of $10,000,000 comprised of a $4,000,000 term loan and a $6,000,000 term loan. In connection with the Merger, the Company assumed and became the borrower under TransEnterix Surgical’s Original Loan Agreement, and agreed to amendments to the Original Loan Agreement, dated as of September 3, 2013 and October 31, 2013, respectively. The Original Loan Agreement had a maturity date of January 1, 2016 and a fixed interest rate of 8.75% per annum. As of September 26, 2014, the outstanding principal amount of the Original Loan Agreement was $5,604,000.

On September 26, 2014, the Company entered into the Amended and Restated Loan Agreement with the Lenders. Under the Amended and Restated Loan Agreement, the Lenders agreed to make certain term loans (the “Amended and Restated Term Loans”) in an aggregate principal amount of up to $25,000,000. The first tranche of the Amended and Restated Term Loans increased the Company’s borrowings at September 26, 2014 from $5,604,000 to $10,000,000. The Amended and Restated Term Loans allowed for interest-only payment at 7.5% per annum through October 31, 2015 and a maturity date of April 1, 2018.

On August 14, 2015, the Company entered into the First Amendment to the Amended and Restated Loan Agreement (the “First Amendment”) with the Lenders. The first tranche of the First Amendment increased the Company’s borrowings at August 14, 2015 from $10,000,000 to $20,000,000. A second tranche of $10,000,000, is available to the Company upon recognition of at least $10,000,000 of trailing six-month revenues from the SurgiBot System and SurgiBot-related products no later than March 31, 2017. The First Amendment allowed for interest-only payments at 7.5% per annum through April 30, 2016 and a maturity date of October 1, 2018.

On September 18, 2015, in connection with entry into the Purchase Agreement with SOFAR S.p.A. (see Note 3 for a description of the related transactions), the Company and the Lenders entered into the Consent and Second Amendment to Amended and Restated Loan Agreement (the “Second Amendment”). The Second Amendment modified the period in which the Company can make interest-only payments at 7.5% per annum on the term loans until January 31, 2016. The Second Amendment has a maturity date of July 1, 2018.

In connection with the entry into the loan agreements, the Company became obligated to pay final payment and facility fees. The final payment fee obligation paid under the Original Loan Agreement at 3.33% was $333,000 and the facility fee payment was $75,000. The final payment fee obligation paid under the Amended and Restated Loan Agreement at 5.45% was $165,920 and the facility fee was $90,000. The facility fee paid under the First Amendment was $90,000. The final payment fee obligation payable under the Second Amendment is 6.5% of the original principal amount of each term loan without the interest only extension and 8.0% with both interest-only extensions.

In addition, in connection with the borrowings, the Company issued warrants to the Lenders to purchase shares of the Company’s common stock amounting to 279,588 warrants under the Original Loan Agreement, 38,324 warrants under the Amended and Restated Loan Agreement and 112,903 under the First Amendment. Additional warrants will be issued if additional tranche term loans are made. The warrants expire seven years from their respective issue date.

The Amended and Restated Loan Agreement, as amended, is secured by a security interest in all assets of the Company and its current and future U.S. subsidiaries, including a security interest in intellectual property proceeds, but excluding a current security interest in intellectual property. The Amended and Restated Loan Agreement contains customary representations (tested on a continual basis) and covenants that, subject to exceptions, restrict the Company’s ability to do the following things: declare dividends or redeem or repurchase equity interests; incur additional liens; make loans and investments; incur additional indebtedness; engage in mergers, acquisitions, and asset sales; transact with affiliates; undergo a change in control; add or change business locations; and engage in businesses that are not related to its existing business.

Further, under the Second Amendment, the Lenders consented to the formation of TransEnterix International, the entry of the Company into the Purchase Agreement and other transaction documents, and the name change of TransEnterix Italia. The Company agreed to pledge 100% of the common stock of TransEnterix International as additional security for the borrowings under the Amended and Restated Loan Agreement, as amended. The Second Amendment added a provision permitting the Company to transfer designated amounts to TransEnterix Italia during the term of the Amended and Restated Loan Agreement. This provision for the transfer of designated amount was amended on November 13, 2015 with the Third Amendment to the Amended and Restated Loan Agreement

In accordance with ASC 470-50 Debt – Modifications and Extinguishments, it was determined that the debt refinancing on September 26, 2014, was considered to be a debt modification. Accordingly, the Company recorded approximately $129,000 of debt discount, consisting of the $75,000 facility fee and the relative fair value of warrants on the issue date of $54,000. Additionally, approximately $30,000 of legal fees were recorded as a result of the transaction. The debt discount and deferred financing costs will be amortized over the life of the new debt agreement using the effective interest method into Interest expense, net.

In accordance with ASC 470-50 Debt – Modifications and Extinguishments, it was determined that the debt refinancings on August 14, 2015 and September 18, 2015 were considered to be debt modifications. Additionally, during the third quarter of 2015, the Company adopted ASU No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The Company recorded a debt discount of approximately $210,000 for these two amendments. Accordingly, the unamortized debt discount is presented as a reduction of the related debt liability in the Company’s balance sheet. In accordance with ASU 2015-03, this adopted guidance was applied retrospectively. The December 31, 2014 balance sheet was adjusted by reducing Other current assets by $49,000, Other long term assets by $51,000, and the Notes payable - less current portion, net of debt discount by $100,000. The debt discount will be amortized over the life of the new debt agreement using the effective interest method into Interest expense, net.

In connection with the issuance of the notes payable and its amendments, TransEnterix Surgical incurred approximately $371,000 in debt issuance costs paid to lenders and third parties and $280,000 in debt issuance costs related to issuance of warrants to the lenders. The unamortized balance of $283,000 as of December 31, 2015 will be amortized using the effective interest method.

As of December 31, 2015 future principal payments under the Company’s notes payable agreements are as follows:


Years ending December 31,
(In thousands)
2016	$	6,903
2017		8,090
2018		5,007

Total	$	20,000

Stock-Based Compensation

12 Months Ended

Dec. 31, 2015

Stock-Based Compensation

14.

Stock-Based Compensation

The Company’s stock-based compensation plans include the TransEnterix, Inc. Amended and Restated Incentive Compensation Plan, as amended, previously named the TransEnterix, Inc. 2007 Incentive Compensation Plan (the “Plan”), as well as options outstanding under the TransEnterix, Inc. Stock Option Plan (the “2006 Plan”). As part of the Merger, options outstanding, whether vested or unvested, under the 2006 Plan were adjusted by the Exchange Ratio of 1.1533, and assumed by the Company concurrent with the closing of the Merger.

The Plan was initially approved by the majority of the stockholders on November 13, 2007. The Plan was amended on June 19, 2012 to increase the number of shares of common stock available for issuance to 1,000,000, was amended on October 29, 2013 to (a) increase the number of shares of common stock authorized for issuance under the Plan from 1,000,000 shares of common stock to 4,940,000 shares of common stock, (b) increase the per-person award limitations for options or stock appreciation rights from 200,000 to 1,000,000 shares and for restricted stock, deferred stock, performance shares and/or other stock-based awards from 100,000 to 500,000 shares, and (c) change the name of the Plan to reflect the Merger-related change . The Plan was again amended on May 7, 2015 to (i) increase the number of shares reserved for issuance under the Plan to 11,940,000 shares; (ii) extend the term of the Plan until May 7, 2025; and (iii) make other changes and updates to the Plan and was further amended in October 2015 to add French Sub-Plan amendments applicable to awards made to France-based employees. The October 2013 and May 2015 amendments were approved by the Board of Directors and stockholders; the French Sub-Plan was approved by the Board of Directors. Under the Plan, which is administered by the Compensation Committee, the Company may grant stock options, stock appreciation rights, restricted stock and/or deferred stock to employees, officers, directors, consultants and vendors. The exercise price of stock options or stock appreciation rights may not be less than the fair market value of the Company’s shares at the date of grant. Additionally, no stock options or stock appreciation rights granted under the Plan may have a term exceeding ten years.

The 2006 Plan was adopted and approved by stockholders in September 2006 and provided for the granting of up to 80,000 stock options to employees, directors, and consultants. Under the 2006 Plan, both employees and non-employees were eligible for such stock options. In 2009, the 2006 Plan was amended to increase the total options pool to 1,110,053. In 2011, the 2006 Plan was amended to increase the total options pool to 3,378,189. The amendments were approved by the Board of Directors and stockholders. The Board of Directors had the authority to administer the plan and determine, among other things, the exercise price, term and dates of the exercise of all options at their grant date. Under the 2006 Plan, options become vested generally over four years, and expire not more than 10 years after the date of grant. As part of the Merger, options outstanding under the 2006 Plan were adjusted by the Conversion Ratio, and remain in existence as options of TransEnterix.

During the years ended December 31, 2015, 2014 and 2013, the Company recognized $3,311,000, $1,840,000 and $941,000, respectively, of stock-based compensation expense, including stock options and restricted stock units. During 2014, the Company granted options with performance-based features. As of December 31, 2014, the Company determined that achievement of the pre-defined corporate performance goals was not probable and no expense was recognized. The performance options were cancelled in 2015.

The Company recognizes as expense, the grant-date fair value of stock options and other stock based compensation issued to employees and non-employee directors over the requisite service periods, which are typically the vesting periods. The Company uses the Black-Scholes-Merton model to estimate the fair value of its stock-based payments. The volatility assumption used in the Black-Scholes-Merton model is based on the calculated historical volatility based on an analysis of reported data for a peer group of companies. The expected term of options granted by the Company has been determined based upon the simplified method, because the Company does not have sufficient historical information regarding its options to derive the expected term. Under this approach, the expected term is the mid-point between the weighted average of vesting period and the contractual term. The risk-free interest rate is based on U.S. Treasury rates whose term is consistent with the expected life of the stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend yield is assumed to be zero. The Company estimates forfeitures based on the historical experience of the Company and adjusts the estimated forfeiture rate based upon actual experience.

The fair value of options granted were estimated using the Black-Scholes-Merton option pricing model based on the assumptions in the table below:


	Years ended December 31,
	2015	2014	2013
Expected dividend yield	0%	0%	0%
Expected volatility	45%-56%	46%-63%	62%-63%
Risk-free interest rate	1.44% - 1.95%	1.60% - 2.30%	1.64% - 1.98%
Expected life (in years)	5.5 – 6.3	5.2 – 7.0	5.7 – 6.1

The Company is also required to estimate the fair value of the common stock underlying the stock-based awards when performing the fair value calculations with the Black-Scholes-Merton option-pricing model. The fair value of the common stock underlying the stock-based awards for the common stock before the Company was public was estimated on each grant date by the Board of Directors, with input from management. The Board of Directors is comprised of a majority of non-employee directors with significant experience in the medical device industry. Given the absence of a public trading market of the Company’s common stock prior to the Merger, and in accordance with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, the Board of Directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of the common stock, including among other things, the rights, preferences and privileges of the redeemable convertible preferred stock, business performance, present value of future cash flows, likelihood of achieving a liquidity event, illiquidity of the Company’s capital stock, management experience, stage of development, industry information and macroeconomic conditions. In addition, the Company’s Board of Directors utilized independent valuations performed by an unrelated third-party specialist to assist with the valuation of the common stock; however, the Company and the Board of Directors have assumed full responsibility for the estimates. The Board of Directors utilized the fair values of the common stock derived in the third-party valuations to set the exercise price for options granted prior to the Merger in 2013.

The following table summarizes the Company’s stock option activity, including grants to non-employees, for the year ended December 31, 2015:


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Options outstanding at December 31, 2014		5,423,741		$	2.82		7.79
Granted		4,407,758			2.76
Forfeited		(434,025	)		4.70
Cancelled		(467,985	)		6.80
Exercised		(628,670	)		0.41

Options outstanding at December 31, 2015		8,300,819			2.63		8.23

The following table summarizes information about stock options outstanding at December 31, 2015:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Exercisable at December 31, 2015		3,096,827	$	2.12		6.58
Vested or expected to vest at December 31, 2015		7,953,823	$	2.61		8.18

The aggregate intrinsic value of stock options outstanding, exercisable, and vested or expected to vest at December 31, 2015 was approximately $3.8 million, $3.3 million, and $3.8 million, respectively. This amount is before applicable income taxes and represents the closing market price of the Company’s common stock at December 31, 2015 less the grant price, multiplied by the number of stock options that had a grant price that is less than the closing market price. This amount represents the amount that would have been received by the optionees had these stock options been exercised on that date.

The total intrinsic value of options exercised during 2015, 2014 and 2013 was approximately $1,603,000, $996,000 and $348,000, respectively.

The Company granted 4,407,758, 2,422,309 and 603,139 options to employees and non-employees during the years ended December 31, 2015, 2014 and 2013, respectively, with a weighted-average grant date fair value of $1.37, $2.87 and $0.95, respectively.

As of December 31, 2015, the Company had future employee stock-based compensation expense of approximately $6,081,000 related to unvested share awards, which is expected to be recognized over an estimated weighted-average period of 3.1 years.

Restricted Stock Units

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

Restricted Stock Units

15.

Restricted Stock Units

In 2013 and 2015, the Company issued Restricted Stock Units (“RSUs”) to certain employees which vest over three years. By their terms, the RSUs become immediately vested upon the earlier of (i) a change of control and (ii) defined vesting dates, subject to the continuous service with the Company at the applicable vesting event. When vested, the RSUs represent the right to be issued the number of shares of the Company’s common stock that is equal to the number of RSUs granted. The fair value of each RSU is estimated based upon the closing price of the Company’s common stock on the grant date. Share-based compensation expense related to RSUs is recognized over the requisite service period as adjusted for estimated forfeitures.

The following is a summary of the RSU activity for the years ended December 31, 2015, 2014 and 2013:


	Number of Restricted Stock Units Outstanding			Weighted Average Grant Date Fair Value
Unvested, December 31, 2012		—			—
Granted		210,000		$	7.19
Vested		—			—

Unvested, December 31, 2013		210,000		$	7.19
Granted		—			—
Vested		(70,000	)		7.19

Unvested, December 31, 2014		140,000		$	7.19
Granted		380,000			2.94
Vested		(70,000	)		7.19
Forfeited		(27,500	)		2.94

Unvested, December 31, 2015		422,500		$	3.64

As of December 31, 2015, 2014 and 2013, the Company recorded approximately $816,000, $503,000 and $121,000, respectively, in compensation expense for the RSUs. As of December 31, 2015, the unrecognized stock-based compensation expense related to unvested RSUs was approximately $1.1 million, which is expected to be recognized over a weighted average period of approximately 1.9 years. The weighted average grant date fair value of the RSUs granted in 2013 was $7.19. No restricted stock units were granted in 2014. The weighted average grant date fair value of the RSUs granted in 2015 was $2.94.

Warrants

12 Months Ended

Dec. 31, 2015

Warrants

16.

Warrants

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 2,420,000 shares of common stock at a price of $1.25 per share for aggregate consideration of approximately $3.0 million. Included in this private placement was the issuance of warrants to purchase approximately 1,209,600 common shares, representing one warrant for every two common shares purchased, with an exercise price of $1.65 per share and five year expiration. Among the 2013 PIPE Investors purchasing shares were related parties who purchased 1.28 million shares and received 640,000 warrants. There were approximately 1.2 million warrants outstanding that were assumed as of the Merger. During the years ended December 31, 2015, 2014 and 2013, 0, 10,000 and 54,000, respectively of these warrants were exercised.

On January 17, 2012, TransEnterix Surgical entered into the Original Loan Agreement (the “Original Loan Agreement”) with Silicon Valley Bank and Oxford Finance LLC. (collectively, the “Lenders”). Pursuant to such agreement, TransEnterix Surgical issued preferred stock warrants to the Lenders on January 17, 2012 and December 21, 2012, respectively, to purchase shares of TransEnterix Surgical preferred stock. The preferred stock warrants expire 10 years from the issue date. The preferred stock warrants were remeasured immediately prior to the Merger. As a result of the remeasurement, the Company recorded approximately $1.8 million of other expense in the accompanying 2013 consolidated statement of operations and other comprehensive income (loss). As of the Merger, the preferred stock warrants converted to common stock warrants, adjusted based on the Exchange Ratio of 1.1533, and the preferred stock warrant liability was reclassified to additional paid-in capital. These warrants are exercisable for an aggregate of approximately 279,588 shares of common stock, with an exercise price of $1.45. During the year ended December 31, 2013, 139,794 of these warrants were exercised in a cashless transaction for 112,766 shares of common stock. None of these warrants were exercised during the years ended December 31, 2015 or 2014.

On September 26, 2014, the Company entered into the Amended and Restated Term Loans with the Lenders. In connection with the Amended and Restated Loan Agreement and the first tranche borrowings, the Company issued 38,325 common stock warrants to the Lenders to purchase shares of the Company’s common stock, with an exercise price of $4.015 per share. Additional common stock warrants will be issued if additional tranche Term Loans are made under the Amended and Restated Loan Agreement. 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 will be amortized using the effective interest method from issuance to the maturity of the term loans. None of these warrants were exercised during the year ended December 31, 2015 and 2014.

On August 14, 2015, in connection with the First Amendment and the first tranche borrowings, the Company issued 112,903 common stock warrants to the Lenders to purchase shares of the Company’s common stock, with an exercise price of $3.10 per share. Additional common stock warrants will be issued if additional tranche term loans are made under the Amended and Restated Loan Agreement, as amended. 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 will be amortized using the effective interest method from issuance to the maturity of the note. None of these warrants were exercised during the year ended December 31, 2015.


	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Weighted Average Fair Value
Outstanding at December 31, 2012		279,588		$	1.45		9.1	$	0.45

Warrants assumed in merger with SafeStitch		1,199,600			1.65		4.3		1.15
Exercised		(193,794	)		1.45		—		5.25

Outstanding at December 31, 2013		1,285,394		$	1.45		4.7	$	1.75
Granted		38,325			4.02		6.7		1.41
Exercised		(10,000	)		1.65		—		—

Outstanding at December 31, 2014		1,313,719		$	1.70		3.9	$	1.75
Granted		112,903			3.10		6.6		0.86
Exercised		—			—		—		—

Outstanding at December 31, 2015		1,426,622		$	1.81		3.2	$	1.54

The aggregate intrinsic value of the common stock warrants in the above table was $1.0 million, $1.6 million and $8.7 million at December 31, 2015, 2014 and 2013, 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.

Controlled Equity Offering and Public Offering of Common Stock

12 Months Ended

Dec. 31, 2015

Controlled Equity Offering and Public Offering of Common Stock

17.

Controlled Equity Offering and Public Offering of Common Stock

On June 11, 2015, the Company sold 16,666,667 shares of common stock at a public offering price of $3.00 per share for aggregate gross proceeds of $50 million in an underwritten firm commitment public offering. Net proceeds after issuance costs were $46.4 million. The closing of the public offering occurred on June 17, 2015. The Company granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 2,500,000 shares of Common Stock.

On July 10, 2015, the underwriters exercised a portion of their option to acquire an additional 2,075,000 shares at the public offering price of $3.00 per share for aggregate additional gross proceeds of $6.2 million. Net proceeds after issuance costs were $5.8 million. The purchase of the option shares closed on July 15, 2015. Total proceeds (including the option) were $52.2 million, net of issuance costs of $4.0 million. The common stock was offered and sold pursuant to the Shelf Registration Statement filed in November 2014 (the “November 2014 Shelf Registration Statement”), which was declared effective on December 19, 2014. The November 2014 Shelf Registration Statement allowed the Company to raise up to $100.0 million through the sale of debt securities, common stock, preferred stock, warrants, or any combination thereof.

On February 20, 2015, the Company entered into a Controlled Equity Offering SM Sales Agreement (the “2015 Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), as sales agent, pursuant to which the Company can sell through Cantor, from time to time, up to $25.0 million in shares of common stock in an at-the-market offering. All sales of shares have been and will continue to be made pursuant to an effective shelf registration statement on Form S-3 filed with the SEC. The Company pays Cantor a commission of approximately 3% of the aggregate gross proceeds received from all sales of common stock under the Sales Agreement. Unless otherwise terminated earlier, the 2015 Sales Agreement continues until all shares available under the 2015 Sales Agreement have been sold.

The following table summarizes the total sales under the 2015 Sales Agreement for the periods indicated (in thousands, except per share amounts):


	Year Ended
	December 31, 2015
Total shares of common stock sold		2,014.3
Average price per share	$	3.25
Gross proceeds	$	6,546
Commissions earned by Cantor	$	197
Other issuance costs	$	259

On April 14, 2014, the Company sold 12,500,000 shares of common stock at a public offering price of $4.00 per share for aggregate gross proceeds of $50.0 million in an underwritten firm commitment public offering. Certain of the Company’s existing stockholders that are affiliated with certain of the Company’s directors purchased $10.0 million of common stock in the public offering. The closing of the public offering occurred on April 21, 2014. The Company granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 1,875,000 shares of Common Stock to cover over-allotments. On April 30, 2014, the underwriters exercised a portion of their over-allotment option to acquire an additional 1,610,000 shares at the public offering price of $4.00 per share for aggregate additional gross proceeds of $6.4 million. The purchase of the over-allotment shares closed on May 5, 2014. Total proceeds were $52.4 million, net of issuance costs of $4.0 million. The common stock was offered and sold pursuant to the Shelf Registration Statement filed in January 2014 (the “January 2014 Shelf Registration Statement”), which was declared effective on April 2, 2014. The January 2014 Shelf Registration Statement allowed the Company to raise up to $100.0 million through the sale of debt securities, common stock, preferred stock, warrants, or any combination thereof.

Basic and Diluted Net Loss per Share

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Basic and Diluted Net Loss per Share

19.

Basic and Diluted Net Loss per Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Diluted potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of preferred stock. In computing diluted net loss per share for the years ended December 31, 2015, 2014, and 2013, no adjustment has been made to the weighted average outstanding common shares as the assumed exercise of outstanding options and warrants and conversion of preferred stock would be anti-dilutive.

Potential common shares not included in calculating diluted net loss per share are as follows:


	December 31,
	2015		2014		2013
Stock options		8,300,819		5,423,741		3,822,887
Stock warrants		1,426,622		1,313,719		1,285,394
Nonvested restricted stock units		422,500		140,000		210,000

Total		10,149,941		6,877,460		5,318,281

Stockholders' Equity

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

Stockholders' Equity

20.

Stockholders’ Equity

TransEnterix Surgical

Common and Preferred Stock

On July 12, 2006, TransEnterix Surgical had 11,533,000 shares of common stock authorized. On December 27, 2007, TransEnterix Surgical authorized an additional 2,883,250 shares of common stock for a total of 14,416,250 authorized shares. On October 2, 2009, TransEnterix Surgical authorized an additional 24,219,300 shares of common stock for a total of 38,635,550 authorized shares. On November 30, 2011 TransEnterix Surgical authorized an additional 88,227,450 shares of common stock for a total of 126,863,000 authorized shares. In January 2012 TransEnterix Surgical authorized an additional 3,459,900 shares of common stock for a total of 130,322,900 authorized shares. As of December 31, 2012, 5,391,095 shares of common stock were issued at $ 0.001 par value per share and were outstanding. Each holder of common stock was entitled to one vote for each share held thereof. In connection with the Merger, the TransEnterix Surgical common stock was converted to common stock of the Company.

On December 27, 2007, TransEnterix Surgical had 6,500,000 shares of preferred stock authorized. On October 2, 2009, TransEnterix Surgical authorized an additional 15,234,402 shares of preferred stock for a total of 21,734,402 authorized shares. On November 30, 2011, TransEnterix Surgical authorized an additional 40,958,843 shares of preferred stock for a total of 62,693,245 authorized shares. In January 2012, TransEnterix Surgical authorized an additional 3,000,000 shares of preferred stock for a total of 65,693,245 shares. In connection with the Merger, the TransEnterix Surgical preferred stock was converted to common stock of the Company.

On December 31, 2007, TransEnterix Surgical completed the issuance of 3,143,749 shares of Series A Redeemable Convertible (“Series A”) Preferred Stock at $ 3.49 per preferred share. In March 2008, TransEnterix Surgical completed a second closing of Preferred Stock and had 3,373,882 shares of Series A Preferred Stock at $ 3.49 per preferred share issued and outstanding as of December 31, 2008. On February 18, 2009, TransEnterix Surgical completed the final closing of Series A Preferred Stock and had 5,734,402 shares of Preferred Stock at $ 3.49 per preferred share issued and outstanding as of December 31, 2011. During 2012, 38,141 shares of Series A Preferred Stock were converted to common stock. At December 31, 2012 TransEnterix Surgical had 5,696,261 shares of Series A Preferred Stock at $ 3.49 per preferred share issued and outstanding. In connection with the Merger, the TransEnterix Surgical Series A Preferred Stock was converted to common stock of the Company.

On October 6, 2009, TransEnterix Surgical completed the issuance of 11,504,298 shares of Series B Redeemable Convertible (“Series B”) Preferred Stock at $ 3.49 per preferred share. On November 30, 2011, TransEnterix Surgical completed the closing of Series B-1 Redeemable Convertible (“Series B-1”) Preferred Stock and had 45,121,691 shares of Preferred Stock at $ 0.33 per preferred share issued and outstanding as of December 31, 2011. In January 2012, TransEnterix Surgical completed a second closing of Series B-1 Preferred Stock. During 2012, 49,998 shares of TransEnterix Surgical’s Series B Preferred Stock were converted to common stock. TransEnterix Surgical had 45,998,220 shares of Series B-1 Preferred Stock at $ 0.33 per share issued and outstanding at December 31, 2012. In connection with the Merger, the TransEnterix Surgical Series B-1 Preferred Stock was converted to common stock of the Company.

Voting Rights

The holders of TransEnterix Surgical common stock and preferred stock shall vote together and not as separate classes, except as otherwise provided by law or agreed to contractually. Each holder of preferred stock was entitled to the number of votes equal to the number of shares of common stock, into which the shares of preferred stock held by such holder could be converted immediately after the close of business on the record date fixed for a stockholders meeting or the effective date of a written consent. The holders of shares of preferred stock were entitled to vote on all matters on which the common stock was entitled to vote and act by written consent in the same manner as the common stock.

Holders of preferred stock were entitled to notice of any stockholders meeting in accordance with the bylaws of TransEnterix Surgical. Fractional votes were not, however, permitted and any fractional voting rights were disregarded.

Dividends

In any calendar year, the holders of outstanding shares of preferred stock were entitled to receive dividends, when, as and if declared by the Board of Directors, out of any assets at the time legally available therefore, at the dividends rate specified for such shares of preferred stock payable in preference and priority to any declaration or payment of any distribution on Common stock of TransEnterix Surgical in such calendar year. No distributions were to be made with respect to the common stock until all declared dividends on preferred stock had been paid or set aside for payment to the preferred stock holders. Payments of any dividends to the holders of the Preferred Stock were to be made on a pro rata basis. The right to receive dividends on shares of preferred stock were not to be cumulative, and no right to such dividends were to accrue to holders of preferred stock by reason of the fact that dividends on said shares were not paid or declared in any calendar year. No dividends were declared during the years ended December 31, 2015, 2014 and 2013.

Liquidation

In the event of a liquidation, dissolution, or winding up of TransEnterix Surgical, either voluntary or involuntary, the holders of Series B-1 Preferred Stock and Series B Preferred Stock were entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of TransEnterix Surgical to the holders of Series A Preferred Stock and the holders of common stock by reason of their ownership of such stock, an amount per share for each share of preferred stock held by them equal to the sum of the liquidation preference for the Series B-1 Preferred Stock and the Series B Preferred Stock, respectively and (ii) all declared and unpaid dividends on such shares of preferred stock. If upon liquidation, the assets of TransEnterix Surgical were insufficient to permit the payments to such stock holders, then the entire assets of TransEnterix Surgical legally available for distributions were to be distributed with equal priority and pro rata among the holders of Series B-1 Preferred Stock and the Series B Preferred Stock in proportion to the full amounts to which they would otherwise be entitled.

After payment or setting aside for payment to the holders of Series B-1 Preferred Stock and Series B Preferred Stock, the holders of Series A Preferred Stock were entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of TransEnterix Surgical to the holders of common stock by reason of their ownership of such stock, an amount per share for each share of preferred stock held by them equal to the sum of the liquidation preference for the Series A Preferred Stock and (ii) all declared and unpaid dividends on such shares of preferred stock. If upon liquidation, the assets of TransEnterix Surgical are insufficient to permit the payments to such stock holders, then the assets of TransEnterix Surgical legally available for distributions to the holders of Series A Preferred Stock after payment of the full amount payable to the holders of Series B-1 Preferred Stock and Series B Preferred Stock were to be distributed with equal priority and pro rata among the holders of Series A Preferred Stock in proportion to the full amounts to which they would otherwise be entitled.

After the payment or setting aside for payment to the holders of preferred stock of the full amounts to holders of Preferred Series B-1, Preferred Series B, and Preferred Series A Stock, the remaining assets of TransEnterix Surgical legally available for distribution were to be distributed pro rata to the holders of the Series B-1 Preferred Stock, Series B Preferred Stock, and common stock of TransEnterix Surgical in proportion to the number of shares of common stock held by them, with the share of Series B-1 Preferred Stock and Series B Preferred Stock being treated for this purpose as if they had been converted to shares of common stock at the then applicable Conversion Rate, as defined in TransEnterix Surgical’s Articles of Incorporation.

Conversion

Each share of Preferred Stock was convertible, at the option of the holder, at any time after the date of issuance at the office of TransEnterix Surgical or any transfer agent for the preferred stock, into that number of fully paid nonassessable shares of common stock determined by dividing the original issue price for the relevant series of preferred stock by the conversion price for such shares in said series. The conversion price for the Preferred Stock Series A and B shall mean $3.49, and Series B-1 shall mean $0.33, and was subject to adjustment from time to time for recapitalizations. In connection with the Merger, the TransEnterix Surgical Series A, Series B and Series B-1 Preferred Stock was converted to common stock of the Company.

Redemption

At the written request of any holder of preferred stock delivered to TransEnterix Surgical on or after the fifth anniversary of the date of the filing of the amended and restated Certificate of Incorporation (November 30, 2016), TransEnterix Surgical shall redeem up to 25% of the shares of preferred stock then held by such holder within 20 days after receiving such notification and up to another 25% of the shares of preferred stock then held by the holder on each of the first three anniversaries of such initial redemption request. The redemption price was equal to the original issuance price plus all declared but unpaid dividends.

Carrying Value

The preferred stock was initially recorded by TransEnterix Surgical at the total proceeds received upon issuance, less the issuance costs. The difference between the total proceeds and the total redemption value at the redemption date is charged first to paid-in capital, if any, and then to the accumulated deficit over the period from issuance until redemption first becomes available. The amount of accretion during each period is determined by using the effective interest rate method. Accretion amounted to approximately $0, $0 and $40,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

The Company

In connection with the Merger, the Company entered into a securities purchase agreement with accredited investors pursuant to which the investors agreed to purchase an aggregate of 7,569,704.4 shares of the Company’s Series B Convertible Preferred Stock for a purchase price of $ 4.00 per share of Series B Preferred Stock, which was paid in cash, cancellation of certain indebtedness of TransEnterix Surgical or a combination thereof. Each share of Series B Preferred Stock was converted into two shares of our common stock, par value $ 0.001 per share, on December 6, 2013 amounting to 15,139,409 shares of common stock.

Related Person Transactions

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(d),(e))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB TOPIC 4.E)
-URI http://asc.fasb.org/extlink&oid=27010918&loc=d3e74512-122707

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.29-31)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 4
-Subparagraph (SAB TOPIC 4.C)
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187143-122770

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Preferred Stock
-URI http://asc.fasb.org/extlink&oid=6521494

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 4
-Section E

Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 4
-Section C

+ Details

Related Person Transactions

12 Months Ended

Dec. 31, 2015

21.

Related Person Transactions

Synecor, LLC and its shareholders and officers collectively owned approximately 6% and 9% of the Company’s common stock at December 31, 2015 and 2014, respectively. Various research and development services are purchased from Synecor LLC and its wholly owned subsidiary Synchrony Labs LLC pursuant to arms’ length terms approved by the Audit Committee and totaled approximately $435,000, $66,000 and $90,000 for the years ended December 31, 2015, 2014 and 2013, respectively.

On September 18, 2015, TransEnterix Italia entered into a six month service agreement for administrative expenses and rent with SOFAR, a shareholder that owned approximately 16% of the Company’s common stock at December 31, 2015. Expenses under this agreement were approximately $89,000 for the year ended December 31, 2015.

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies

22.

Commitments and Contingencies

Contingent Consideration

As discussed in Note 3, in September 2015, the Company completed the ALF-X Acquisition using a combination of cash, stock and potential post-acquisition milestone payments. These milestone payments may be payable in the future, depending on the achievement of certain regulatory and commercial milestones. The maximum amount of the aggregate milestone payments could be €27.5 million. As of December 31, 2015, the fair value of the contingent consideration was $23.5 million.

Operating Leases

On November 2, 2009, TransEnterix Surgical entered into an operating lease for its corporate offices for a period of five years commencing in April 2010. On June 12, 2014, the Company entered into a lease amendment extending the term of the lease for a period of 3 years and 2 months commencing on May 1, 2015 and expiring on June 30, 2018, with an option to renew for an additional three years. On October 25, 2013, the Company entered into an operating lease for its warehouse for a period of four years and four months commencing in January 2014, with an option to renew for an additional six years. Rent expense was approximately $513,000, $ 424,000 and $360,000 for the years ended December 31, 2015, 2014 and 2013, respectively. The Company’s approximate future minimum payments for its operating lease obligations that have initial or remaining noncancelable terms in excess of one year are as follow:


	Years ending December 31,
	(In thousands)
2016	$	592
2017		609
2018		290

Total	$	1,491

In 2013, TransEnterix Surgical leased a manufacturing facility under a one-year lease from a third party. Rent expense under this lease was $55,000 for the year ended December 31, 2013. SafeStitch leases various office space on a month to month basis. Rent expense under these leases was $0, $89,000 and $55,000 for the years ended December 31, 2015, 2014 and 2013, respectively, including $89,000 and $48,000 to a company controlled by a shareholder for the years ended December 31, 2014 and 2013, respectively.

License and Supply Agreements

As discussed in Note 3, in September 2015, the Company completed the ALF-X Acquisition. As part of this transaction, the Company assumed certain license and supply agreements. Commitments under these agreements amount to approximately $730,000 in 2016, $654,000 in 2017, $872,000 in 2018, $872,000 in 2019, $545,000 in 2020 and $3.8 million thereafter until termination in 2027.

The Company is obligated to pay royalties to Creighton on the sales of products licensed by SafeStitch from Creighton pursuant to an exclusive license and development agreement. The Company is also obligated under an agreement with Dr. Parviz Amid to pay a royalty, for a period of ten years from the first commercial sale of a licensed product, at the rate of 1.5% for the first three years and then 4% in the following seven years to Dr. Amid on the net sales of any product developed with Dr. Amid’s assistance under such agreement. Such agreements covered products that were previously sold by the Company. No royalties were incurred under either of these agreements during the years ended December 31, 2015, 2014 and 2013.

On February 13, 2014, TransEnterix Surgical, Inc., a wholly owned subsidiary of the Company, entered into a Robotic Development and Supply Agreement (the “Robotic Agreement”) with Microline Surgical, Inc. (“Microline”). Under the Robotic Agreement, Microline is developing a flexible sealer product for exclusive use by the Company with the SurgiBot System in open, minimally invasive and laparoscopic surgery. Development of the contemplated products under the Robotic Agreement is ongoing. If such products are successfully developed and applicable regulatory approvals obtained, the Company will owe an aggregate of $1,000,000 to Microline in milestone fees. Actual payment of such milestone fees is substantially uncertain and is dependent on product development activities. Payments under the Robotic Agreement were $400,000 for the year ended December 31, 2015. If the products are successfully developed and applicable regulatory approvals obtained, the Company is committed to product supply commitments set forth in the Robotic Agreement.

The Company has placed orders with various suppliers for the purchase of certain tooling, supplies and contract engineering and research services. Each of these orders has a duration or expected completion within the next twelve months.

Quarterly Results of Operation (Unaudited)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results of Operation (Unaudited)

23.

Quarterly Results of Operation (Unaudited)

The following is a summary of the Company’s unaudited quarterly results of operations for the fiscal years ended December 31, 2015 and 2014 (in thousands, except per share amounts):


	Fiscal Year Ended December 31, 2015
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total Year
Total revenues	$	—		$	—		$	—		$	—		$	—
Cost of goods sold		—			—			—			—			—
Amortization of intangible assets		125			126			338			1,596			2,185
Acquisition related costs		—			—			4,003			228			4,231
Other operating expenses		9,714			8,942			9,223			12,076			39,955
Interest expense, net		281			280			436			604			1,601

Loss before income taxes		(10,120	)		(9,348	)		(14,000	)		(14,504	)		(47,972	)
Income tax benefit		—			—			99			925			1,024

Net loss	$	(10,120	)	$	(9,348	)	$	(13,901	)	$	(13,579	)	$	(46,948	)

Net loss per share – basic and diluted	$	(0.16	)	$	(0.14	)	$	(0.16	)	$	(0.13	)	$	(0.59	)

	Fiscal Year Ended December 31, 2014
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total Year
Total revenues	$	93		$	113		$	61		$	134		$	401
Cost of goods sold		220			238			202			435			1,095
Amortization of intangible assets		126			126			125			126			503
Other operating expenses		6,905			10,130			11,004			7,373			35,412
Interest expense, net		321			206			237			279			1,043

Loss before income taxes		(7,479	)		(10,587	)		(11,507	)		(8,079	)		(37,652	)
Income tax benefit		—			—			—			—			—

Net loss	$	(7,479	)	$	(10,587	)	$	(11,507	)	$	(8,079	)	$	(37,652	)

Net loss per share – basic and diluted	$	(0.15	)	$	(0.18	)	$	(0.18	)	$	(0.13	)	$	(0.64	)

Subsequent Events

12 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

Subsequent Events

24.

Subsequent Events

Subsequent to year-end, the Company sold an additional 5,710,214 shares under the 2015 Sales Agreement at an average price per share of $3.23, for gross proceeds of $18.4 million and net proceeds of $17.9 million. Sales under the 2015 Sales Agreement have been fully sold, with cumulative shares of 7,724,488, gross proceeds of $25.0 million and net proceeds of $24.0 million. In addition, on February 9, 2016, the Company entered into a Controlled Equity Offering SM Sales Agreement (the “2016 Sales Agreement”) with Cantor, as sales agent, pursuant to which the Company can sell through Cantor, from time to time, up to $43.56 million in shares of common stock in an at-the-market offering. All sales of shares have been and will continue to be made pursuant to an effective shelf registration statement on Form S-3 filed with the SEC. The Company pays Cantor a commission of approximately 3% of the aggregate gross proceeds received from all sales of common stock under the 2016 Sales Agreement. Unless otherwise terminated earlier, the 2016 Sales Agreement continues until all shares available under the Sales Agreement have been sold.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2015

Cash and Cash Equivalents, Restricted Cash, and Short-Term Investments

Basis of Presentation

Basis of Presentation

Going Concern

Going Concern

Use of Estimates

Use of Estimates

Reverse Merger

Reverse Merger

As a result of the Reverse Merger with SafeStitch, historical common stock amounts and additional paid in capital have been retroactively adjusted using an Exchange Ratio of 1.1533.

Reverse Stock Split

Reverse Stock Split

Cash and Cash Equivalents, Restricted Cash, and Short-Term Investments

Restricted cash, consisting of a money market account used as collateral securing a letter of credit under the terms of the corporate office operating lease that commenced in 2010.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Concentrations and Credit Risk

Concentrations and Credit Risk

Accounts Receivable

Accounts Receivable

Inventories

Inventories

Identifiable Intangible Assets and Goodwill

Identifiable Intangible Assets and Goodwill

In-Process Research and Development

In-Process Research and Development

Property and Equipment

Property and Equipment

Property and equipment consists primarily of machinery, manufacturing equipment, computer equipment, furniture, and leasehold improvements, which are recorded at cost.

Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:


Machinery and manufacturing equipment		3-5 years
Computer equipment		3 years
Furniture		5 years
Leasehold improvements		Lesser of lease term or 3 to 10 years

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Contingent Consideration

Contingent Consideration

Translation of Foreign Currencies

Translation of Foreign Currencies

Business Acquisitions

Business Acquisitions

Risk and Uncertainties

Risk and Uncertainties

Preferred Stock Warrant Liability

Preferred Stock Warrant Liability

Revenue Recognition

Revenue Recognition

Cost of Goods Sold

Cost of Goods Sold

Cost of goods sold consists of materials, labor and overhead incurred internally to produce the products. Shipping and handling costs incurred by the Company are included in cost of goods sold.

Research and Development Costs

Research and Development Costs

Stock-Based Compensation

Stock-Based Compensation

Income Taxes

Income Taxes

Comprehensive Loss

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Segments

Segments

Impact of Recently Issued Accounting Standards

Impact of Recently Issued Accounting Standards

Reclassifications

Reclassifications

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Estimated Lives of Assets

Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:


Machinery and manufacturing equipment		3-5 years
Computer equipment		3 years
Furniture		5 years
Leasehold improvements		Lesser of lease term or 3 to 10 years

Acquisition of ALF-X Surgical Robotic System/ Closing of 2013 Merger and Financing Transaction (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of Allocation of Purchase Price to Net Assets Acquired

The following table summarizes the allocation of the purchase price to the net assets acquired (in thousands):


Cash and cash equivalents	$	597
Accounts receivable		54
Inventory		50
Other current assets		53
Property and equipment		185
Other long-term asset		2
Intangible assets		10
Goodwill		93,842

Total assets acquired	$	94,793

Accounts payable and other liabilities		642

Net assets acquired	$	94,151

Schedule of Purchase Price

The following table summarizes the purchase price (in thousands):


Common shares outstanding at the date of Merger		12,350
Closing price per share	$	7.60

	$	93,858

Cash consideration		293

Total consideration	$	94,151

ALF-X Surgical Robotic System Acquisition [Member]

Schedule of Allocation of Purchase Price to Net Assets Acquired

The ALF-X Acquisition-date fair value of the consideration is as follows (in thousands, except for per share amounts):


Common shares issued		15,543
Closing price per share	$	2.81

	$	43,677

Cash consideration		25,000

Contingent consideration		23,900

Total consideration	$	92,577

Schedule of Estimated Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on September 21, 2015, the date of acquisition (in thousands):


Accounts receivable	$	78
Inventories		2,800
Current deferred tax asset		526
Other current assets		4,180
Property and equipment		1,384
Intellectual property		48,500
In-process research and development		17,100
Goodwill		38,348

Total assets acquired	$	112,916

Accounts payable and other liabilities		1,915
Long-term deferred tax liabilities		18,424

Net assets acquired	$	92,577

Summary of Business Acquisition, ProForma Information

The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for transaction-related costs and amortization of intellectual property.


	Year Ended December 31,
	2015		2014
	(In thousands except per share amounts)
Revenue	$	77	$	401
Net loss		53,994		46,874
Net loss per share	$	0.57	$	0.63

Cash, Cash Equivalents, Restricted Cash and Short-Term Investments (Tables)

12 Months Ended

Dec. 31, 2015

Cash and Cash Equivalents [Abstract]

Summary of Cash, Cash Equivalents and Restricted Cash

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


	December 31,
	2015		2014
	(In thousands)
Cash	$	1,666	$	1,511
Money market		36,783		33,255

Total cash and cash equivalents	$	38,449	$	34,766

Restricted cash	$	—	$	250

Total	$	38,449	$	35,016

Fair Value (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Summary of Assets Measured at Fair Value on Recurring Basis


	December 31, 2015
	(In thousands)
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets measured at fair value
Cash and Cash Equivalents	$	38,449	$	—	$	—	$	38,449

Total Assets measured at fair value	$	38,449	$	—	$	—	$	38,449

Liabilities measured at fair value
Contingent consideration	$	—	$	—	$	23,500	$	23,500

Total liabilities measured at fair value	$	—	$	—	$	23,500	$	23,500


	December 31, 2014
	(In thousands)
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets measured at fair value
Cash and Cash Equivalents	$	34,766	$	—	$	—	$	34,766
Restricted Cash		250		—		—		250

Total Assets measured at fair value	$	35,016	$	—	$	—	$	35,016

Quantitative Information about Inputs and Valuation Methodologies Used for Fair Value Measurements Classified in Level 3


	Valuation Methodology	Significant Unobservable Input	Weighted Average (range, if applicable)
Contingent consideration	Probability weighted income approach	Milestone dates	2016 to 2017
		Discount rate Probability of occurrence	7.5% to 9.0% 100%

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


	Fair Value Measurement at Reporting Date (Level 3)
	(In thousands)
Balance at December 31, 2012	$	109
Change in fair value of preferred stock warrant liability recorded in other expense		1,800
Reclassification to additional paid-in capital upon the Merger		(1,909	)

Balance at December 31, 2013	$	—
Additions		—

Balance at December 31, 2014	$	—
Additions for contingent consideration		23,900
Change in fair value		(400	)

Balance at December 31, 2015	$	23,500

Current portion		12,500
Long-term portion		11,000

Balance at December 31, 2015	$	23,500

Accounts Receivable, Net (Tables)

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Summary of Accounts Receivable

The following table presents the components of accounts receivable:


	December 31,
	2015		2014
	(In thousands)
Gross accounts receivable	$	76	$	221
Allowance for uncollectible accounts		—		(88	)

Total accounts receivable, net	$	76	$	133

Inventories (Tables)

12 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Schedule of Inventory

The components of inventories are as follows:


	December 31,
	2015		2014
	(In thousands)
Finished goods	$	2,704	$	358
Raw materials		1,928		—
Reserve for excess and obsolete inventory		—		(358	)

Total inventories	$	4,632	$	—

Short-term portion	$	3,923	$	—
Long-term portion		709		—

Total inventories	$	4,632	$	—

Other Current Assets (Tables)

12 Months Ended

Dec. 31, 2015

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of other current assets

The following table presents the components of other current assets:


	December 31,
	2015		2014
	(In thousands)
Advances to vendors	$	5,403	$	—
Prepaid expenses		750		608
Other receivables		536		132

Total	$	6,689	$	740

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment

Property and equipment consisted of the following:


	December 31,
	2015			2014
	(In thousands)
Machinery and manufacturing equipment	$	5,846		$	3,797
Computer equipment		1,875			1,710
Furniture		374			358
Leasehold improvements		1,700			1,405

Total property and equipment		9,795			7,270
Accumulated depreciation and amortization		(5,387	)		(4,150	)

Property and equipment, net	$	4,408		$	3,120

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

12 Months Ended

Dec. 31, 2015

Carrying Value of Goodwill and Change in Balance

The carrying value of goodwill and the change in the balance for the years ended December 31, 2015 and 2014 is as follows:


	Goodwill
	(In thousands)
Balance at December 31, 2013	$	93,842
Additions		—

Balance at December 31, 2014		93,842
Additions		38,348
Foreign currency translation impact		(1,321	)

Balance at December 31, 2015	$	130,869

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

The components of gross intellectual property, accumulated amortization, and net intellectual property as of December 31, 2015, and 2014 as follows:


	December 31, 2015										December 31, 2014
	(In thousands)										(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
Patents	$	5,000	$	(3,259	)	$	—		$	1,741	$	5,000	$	(2,759	)	$	—	$	2,241

Developed technology		48,500		(1,672	)		(1,671	)		45,157		—		—			—		—

Total intellectual property	$	53,500	$	(4,931	)	$	(1,671	)	$	46,898	$	5,000	$	(2,759	)	$	—	$	2,241

Summary of Estimated Future Amortization Expense of Intangible Assets

The estimated future amortization expense of intangible assets as of December 31, 2015 is as follows:


	Amount
Fiscal Year	(In thousands)
2016	$	7,429
2017		7,429
2018		7,429
2019		7,170
2020		6,929
Thereafter		10,512

Total	$	46,898

In-Process Research and Development [Member]

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

The carrying value of the Company’s IPR&D assets and the change in the balance for the year ended December 31, 2015 is as follows:


	In-Process Research and Development
	(In thousands)
Balance at December 31, 2014	$	—
Additions		17,100
Foreign currency translation impact		(589	)

Balance at December 31, 2015	$	16,511

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Summary of Components of Income Tax Expense (Benefit)

The components for the income tax expense (benefit) are as follows for the years ended December 31 (in thousands):


	2015			2014		2013
Current income taxes
Federal	$	—		$	—	$	—
State		—			—		—
Foreign		—			—		—
Deferred income taxes
Federal		—			—		—
State		—			—		—
Foreign		(1,024	)		—		—

Total income tax expense (benefit)	$	(1,024	)	$	—	$	—

Schedule of Income (Loss) From Operations Before Taxes

The United States and foreign components of loss from operations before taxes are as follows for the years ended December 31 (in thousands):


	2015			2014			2013
United States	$	(44,438	)	$	(37,652	)	$	(28,358	)
Foreign		(3,534	)		—			—

Total loss from operations before taxes	$	(47,972	)	$	(37,652	)	$	(28,358	)

Summary of Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets consist of the following at December 31 (in thousands):


	2015			2014
Current deferred tax assets:
Inventory reserves	$	—		$	537
Accrued expenses		—			373
Deferred rent		—			17
Allowance for uncollectible accounts receivable		—			32

Valuation allowance		—			(959	)

Net current deferred tax asset		—			—

Noncurrent deferred tax assets:
Stock-based compensation		1,543			1,154
Inventory		1,819			—
Accrued expenses and other		936			—
Contribution carryforward		2			2
Research credit carryforward		4,224			3,200
Fixed assets		275			278
Capitalized start-up costs and other intangibles		3,864			4,233
Net operating loss carryforwards		64,867			51,145

		77,530			60,012
Valuation allowance		(75,897	)		(60,009	)

Net noncurrent deferred tax asset		1,633			3

Noncurrent deferred tax liabilities

Fixed assets		(973	)		—
Purchase accounting intangibles		(16,923	)		(3	)

Net noncurrent deferred tax liability		(17,896	)		—

Net deferred tax asset (liability)	$	(16,263	)	$	—

Summary of Change in Gross Unrecognized Tax Positions

The following is a tabular reconciliation of the Company’s change in gross unrecognized tax positions at December 31 (in thousands):


	2015		2014		2013
Beginning balance	$	606	$	—	$	—
Gross increases for tax positions related to current periods		256		606		—
Gross increases for tax positions related to prior periods		—		—		—

Ending balance	$	862	$	606	$	—

Summary of Provision for Income Taxes

Taxes computed at the statutory federal income tax rate of 34% are reconciled to the provision for income taxes as follows for the years ended December 31:


	2015						2014						2013
	Amount			% of Pretax Earnings			Amount			% of Pretax Earnings			Amount			% of Pretax Earnings
United States federal tax at statutory rate	$	(16,311	)		34.0	%	$	(12,801	)		34.0	%	$	(9,642	)		34.0	%
State taxes (net of deferred benefit)		(1,121	)		2.3	%		(786	)		2.0	%		(662	)		2.3	%
Nondeductible expenses		1,797			(3.7	%)		253			(0.7	%)		1,556			(5.5	%)
Research & Development credits		(1,281	)		2.7	%		(1,532	)		4.1	%		—			0.0	%
Change in unrecognized tax benefits		256			(0.5	%)		606			(1.6	%)		—			0.0	%
Foreign tax rate differential		175			(0.4	%)		—			0.0	%		—			0.0	%
Adjustment for valuation allowance as part of purchase accounting		—			0.0	%		—			0.0	%		(11,785	)		41.6	%
Other, net		532			(1.2	%)		392			(1.0	%)		(200	)		0.7	%
Change in valuation allowance		14,929			(31.1	%)		13,868			(36.8	%)		20,733			(73.1	%)

Income tax benefit	$	(1,024	)		2.1	%	$	—			0.0	%	$	—			0.0	%

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of Accrued Expenses


	December 31,
	2015		2014
	(In thousands)
Taxes and other assessments	$	3,112	$	189
Compensation and benefits		2,492		1,036
Legal and professional fees		268		145
Consulting and other vendors		553		208
Interest and final payment fee		411		131
Deferred rent		278		46
Other		281		14

Total	$	7,395	$	1,769

Notes Payable (Tables)

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Summary of Notes Payable Agreements

As of December 31, 2015 future principal payments under the Company’s notes payable agreements are as follows:


Years ending December 31,
(In thousands)
2016	$	6,903
2017		8,090
2018		5,007

Total	$	20,000

Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Share Based Fair Value Assumptions

The fair value of options granted were estimated using the Black-Scholes-Merton option pricing model based on the assumptions in the table below:


	Years ended December 31,
	2015	2014	2013
Expected dividend yield	0%	0%	0%
Expected volatility	45%-56%	46%-63%	62%-63%
Risk-free interest rate	1.44% - 1.95%	1.60% - 2.30%	1.64% - 1.98%
Expected life (in years)	5.5 – 6.3	5.2 – 7.0	5.7 – 6.1

Schedule of Stock Option Activity

The following table summarizes the Company’s stock option activity, including grants to non-employees, for the year ended December 31, 2015:


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Options outstanding at December 31, 2014		5,423,741		$	2.82		7.79
Granted		4,407,758			2.76
Forfeited		(434,025	)		4.70
Cancelled		(467,985	)		6.80
Exercised		(628,670	)		0.41

Options outstanding at December 31, 2015		8,300,819			2.63		8.23

Schedule of Stock Options Outstanding

The following table summarizes information about stock options outstanding at December 31, 2015:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Exercisable at December 31, 2015		3,096,827	$	2.12		6.58
Vested or expected to vest at December 31, 2015		7,953,823	$	2.61		8.18

Restricted Stock Units (Tables)

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

Summary of Restricted Stock Unit Activity

The following is a summary of the RSU activity for the years ended December 31, 2015, 2014 and 2013:


	Number of Restricted Stock Units Outstanding			Weighted Average Grant Date Fair Value
Unvested, December 31, 2012		—			—
Granted		210,000		$	7.19
Vested		—			—

Unvested, December 31, 2013		210,000		$	7.19
Granted		—			—
Vested		(70,000	)		7.19

Unvested, December 31, 2014		140,000		$	7.19
Granted		380,000			2.94
Vested		(70,000	)		7.19
Forfeited		(27,500	)		2.94

Unvested, December 31, 2015		422,500		$	3.64

Warrants (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Warrant Activity

The warrants were recognized at the relative fair value on the issuance date as a debt discount and will be amortized using the effective interest method from issuance to the maturity of the note. None of these warrants were exercised during the year ended December 31, 2015.


	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Weighted Average Fair Value
Outstanding at December 31, 2012		279,588		$	1.45		9.1	$	0.45

Warrants assumed in merger with SafeStitch		1,199,600			1.65		4.3		1.15
Exercised		(193,794	)		1.45		—		5.25

Outstanding at December 31, 2013		1,285,394		$	1.45		4.7	$	1.75
Granted		38,325			4.02		6.7		1.41
Exercised		(10,000	)		1.65		—		—

Outstanding at December 31, 2014		1,313,719		$	1.70		3.9	$	1.75
Granted		112,903			3.10		6.6		0.86
Exercised		—			—		—		—

Outstanding at December 31, 2015		1,426,622		$	1.81		3.2	$	1.54

Controlled Equity Offering and Public Offering of Common Stock (Tables)

12 Months Ended

Dec. 31, 2015