What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-03-11 compared with 2020-03-17 · 224 added, 327 removed, 705 unchanged (44% of the section changed)

7 unchanged sentences

Foreign currency transaction gains (losses) are included in the consolidated statements of operations as a component of other income (expense).

We recognized foreign currency transaction losses of $0.2 million during the fiscal year ended December 28, 2019.

We recognized foreign currency transaction gains of $1.0 million during the fiscal year ended December 31, 2020.

Foreign currency translation exposure results from the translation of the financial statements of our subsidiaries whose functional currency is not the U.S.

5 unchanged sentences

The effects of these foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ equity (deficit) on our consolidated balance sheets.

We recorded a foreign currency translation gain of less than $0.1 million during the fiscal year ended December 28, 2019.

We recorded a foreign currency translation loss of less than $0.1 million during the fiscal year ended December 31, 2020.

For the fiscal year ended December 31, 2020, 18% of our net revenue and 7% of our operating costs and expenses were generated by subsidiaries whose functional currency is not the U.S.

27 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of TransMedics Group, Inc.

10 unchanged sentences

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

12 unchanged sentences

Marketable securities

Accounts receivable, net of $0 allowance

Accounts receivable

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net

Deferred offering costs

Restricted cash

Other long-term assets

Liabilities, Convertible Preferred Stock and Stockholders’ Deficit

Liabilities and Stockholders’ Equity

Current liabilities:

4 unchanged sentences

Total current liabilities

Preferred stock warrant liability

Long-term debt, net of discount and current portion

2 unchanged sentences

Commitments and contingencies (Note 12)

Convertible preferred stock (Series A-1, B, B-1, C, D, E and F) $0.0001 par

no shares and 50,776,054 shares authorized at December 28, 2019 and

December 29, 2018, respectively;

and no shares and 50,404,140 shares issued

and outstanding at December 28, 2019 and December 29, 2018, respectively

Stockholders’ deficit:

Stockholders’ equity:

Preferred stock, no par value;

25,000,000 shares and no shares authorized

at December 28, 2019 and December 29, 2018, respectively;

issued and outstanding at December 28, 2019 and December 29, 2018

25,000,000 shares authorized;

issued or outstanding

Common stock, no par value;

150,000,000 shares and no shares authorized at

December 28, 2019 and December 29, 2018, respectively;

21,184,524 shares

and no shares issued and outstanding at December 28, 2019 and

December 29, 2018, respectively

Common stock, $0.0001 par value;

no shares and 60,000,000 shares

authorized at December 28, 2019 and December 29, 2018, respectively;

shares issued and 1,397,800 shares issued at December 28, 2019 and

December 29, 2018, respectively;

and no shares and 1,397,493 shares

outstanding at December 28, 2019 and December 29, 2018, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

150,000,000 shares authorized;

27,175,305 shares and

21,184,524 shares issued and outstanding at December 31, 2020 and December 28,

2019, respectively

Accumulated other comprehensive loss

Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities, convertible preferred stock and stockholders’ equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

12 unchanged sentences

Change in fair value of preferred stock warrant liability

Other income (expense), net

Other income, net

Total other expense, net

1 unchanged sentence

Provision for income taxes

Net loss per share attributable to common stockholders, basic and

Net loss per share attributable to common stockholders, basic and diluted

Weighted average common shares outstanding, basic and diluted

15 unchanged sentences

Stockholders’

Balances at December 30, 2017

Issuance of common stock upon

the exercise of common stock

Abandonment of shares of

common stock by

Stock-based compensation

Foreign currency translation

Unrealized gains (losses) on

marketable securities

Equity (Deficit)

Balances at December 29, 2018

19 unchanged sentences

Foreign currency translation

Unrealized gains (losses) on

Unrealized gains on

marketable securities

Balances at December 28, 2019

Issuance of common stock

upon the exercise of

common stock options

Issuance of common stock in

connection with employee

stock purchase plan

Issuance of common stock

in public offering, net of

discounts and issuance

costs of $585

Stock-based compensation

Foreign currency

translation adjustment

Unrealized losses on

marketable securities

Balances at December 31, 2020

The accompanying notes are an integral part of these consolidated financial statements.

TRANSMEDICS GROUP, INC.

9 unchanged sentences

Net amortization (accretion) of premiums (discounts) on marketable securities

Loss on extinguishment of debt

Unrealized foreign currency transaction losses

Unrealized foreign currency transaction (gains) losses

Changes in operating assets and liabilities:

10 unchanged sentences

Proceeds from sales and maturities of marketable securities

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of long-term debt, net of issuance costs

Repayments of long-term debt

Proceeds from issuance of common stock in initial public offering, net

Proceeds from issuance of common stock in public offering, net

of underwriting discounts and commissions

Payments of initial public offering and other financing costs

Payments of public offering and other financing costs

Proceeds from issuance of common stock upon exercise of stock options

Proceeds from issuance of common stock in connection with employee stock

purchase plan

Proceeds from Paycheck Protection Program loan

Repayment of Paycheck Protection Program loan

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

10 unchanged sentences

Settlement of accrued financing fee

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash shown in the statement of cash flows

The accompanying notes are an integral part of these consolidated financial statements.

5 unchanged sentences

TransMedics, Inc.

(the “TransMedics”), an operating company and wholly owned subsidiary of TransMedics Group was incorporated in the State of Delaware in August 1998.

(“TransMedics”), an operating company and wholly owned subsidiary of TransMedics Group was incorporated in the State of Delaware in August 1998.

The Company is a commercial-stage medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states.

2 unchanged sentences

The Company’s OCS technology replicates many aspects of the organ’s natural living and functioning environment outside of the human body.

The Company is subject to risks and uncertainties common to companies in the medical device industry and of similar size, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, and the need to obtain additional financing to fund operations.

Products currently under development will require additional research and development efforts, including additional clinical testing and regulatory approval, prior to commercialization.

These efforts require additional capital, adequate personnel, infrastructure and extensive compliance-reporting capabilities.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s technology will be obtained, that any products will obtain necessary government regulatory approval or that any approved products will be commercially viable.

The Company operates in an environment of rapid change in technology and competition from other medical device companies.

The Corporate Reorganization

On May 6, 2019, immediately prior to the closing of the Company’s initial public offering (the “IPO”), the Company completed a corporate reorganization whereby TransMedics, the direct parent of TransMedics Group prior to the corporate reorganization, became a direct, wholly-owned subsidiary of TransMedics Group pursuant to the merger of TMDX, Inc., a direct, wholly-owned subsidiary of TransMedics Group prior to the corporate reorganization, with and into TransMedics, with TransMedics as the surviving corporation.

Pursuant to the terms of an agreement and plan of merger and reorganization, as a result of the merger, each outstanding share of common stock of TransMedics was converted into shares of common stock of TransMedics Group on a 3.5-for-one basis, each outstanding share of convertible preferred stock of TransMedics was converted into shares of common stock of TransMedics Group based on the conversion ratio of each individual series of preferred stock, as defined in the certificate of incorporation of TransMedics prior to the conversion, and the 3.5-for-one ratio on which shares of common stock of TransMedics were converted into common stock of TransMedics Group;

each outstanding option to purchase shares of common stock of TransMedics was converted into an outstanding option to purchase shares of common stock of TransMedics Group adjusted on a 3.5-for-one basis, with a corresponding adjustment to the exercise price;

and each outstanding warrant to purchase shares of preferred stock of TransMedics was converted into a warrant to purchase shares of common stock of TransMedics Group adjusted on a 3.5-for-one basis, with a corresponding adjustment to the exercise price.

This is referred to as the “Corporate Reorganization.”

All share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the 3.5-for-one conversion ratio applied to common stock in the Corporate Reorganization.

Immediately following the Corporate Reorganization, (i) TransMedics Group became a holding company with no material assets other than 100% of the equity interests in TransMedics, (ii) the holders of capital stock in TransMedics became shareholders of TransMedics Group and (iii) the historical consolidated financial statements of TransMedics became the historical consolidated financial statements of TransMedics Group because the Corporate Reorganization was accounted for as a reorganization of entities under common control.

Prior to the Corporate Reorganization, TransMedics Group had not conducted any activities other than in connection with its formation and in preparation for the IPO and had no material assets other than 100% of the equity interests in TMDX, Inc.

On May 6, 2019, the Company completed its IPO, pursuant to which it issued and sold 6,543,500 shares of common stock, inclusive of 853,500 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares.

On May 6, 2019, the Company completed its initial public offering (the “IPO”), pursuant to which it issued and sold 6,543,500 shares of common stock, inclusive of 853,500 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares.

The aggregate net proceeds received by the Company from the IPO were $91.4 million, after deducting underwriting discounts and commissions as well as other offering costs of $6.0 million.

On May 26, 2020, the Company completed an underwritten public offering of 5,750,000 shares of its common stock, inclusive of 750,000 shares sold by the Company pursuant to the full exercise of the underwriters’ option to purchase additional shares.

The aggregate net proceeds received by the Company from the offering were approximately $75.1 million, after deducting underwriting discounts and commissions as well as other offering costs of $0.6 million.

Prior to 2020, the Company’s fiscal year ended on the last Saturday in December, and the Company reported fiscal years using a 52/53-week convention.

Under this convention, certain fiscal years contained 53 weeks.

Each fiscal year was typically composed of four 13-week fiscal quarters, but in years with 53 weeks, the fourth quarter was a 14-week period.

The fiscal year ended December 28, 2019 included 52 weeks.

In February 2020, the Company changed the end of its fiscal year end from the last Saturday in December to December 31.

As a result of this change, the Company’s current fiscal year ended on December 31, 2020 and its fiscal quarters end on March 31, June 30 and September 30.

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

The Company has incurred recurring losses since inception, including net losses attributable to the Company of $33.5 million for the fiscal year end ended December 28, 2019 and $23.8 million for the fiscal year ended December 29, 2018.

The Company has incurred recurring losses since inception, including net losses attributable to the Company of $28.7 million for the fiscal year ended December 31, 2020 and $33.5 million for the fiscal year ended December 28, 2019.

As of December 31, 2020, the Company had an accumulated deficit of $398.2 million.

2 unchanged sentences

The Company may need to seek additional funding through equity financings, debt financings or strategic alliances.

The Company may not be able to obtain financing on acceptable terms, or at all, and the terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.

The Company may not be able to obtain financing on acceptable terms, or at all, and the terms of any financing may adversely affect the holdings or the rights of the Company’s shareholders.

If the Company is unable to obtain funding, the Company will be required to delay, reduce or eliminate some or all of its research and development programs, product expansion or commercialization efforts, or the Company may be unable to continue operations.

Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Basis of Presentation

The Company’s fiscal year ends on the last Saturday in December, and the Company reports fiscal years using a 52/53-week convention.

Under this convention, certain fiscal years contain 53 weeks.

Each fiscal year is typically composed of four 13-week fiscal quarters, but in years with 53 weeks, the fourth quarter is a 14-week period.

The fiscal year ended December 28, 2019 and December 29, 2018 included 52 weeks.

Potential risks and uncertainties also include, without limitation, uncertainties regarding the duration and magnitude of the impact of the COVID-19 pandemic on the Company’s business and the economy generally.

Products currently under development will require additional research and development efforts, including additional clinical testing and regulatory approval, prior to commercialization.

These efforts require additional capital, adequate personnel, infrastructure and extensive compliance-reporting capabilities.

The Company’s research and development may not be successfully completed, adequate protection for the Company’s technology may not be obtained, the Company may not obtain necessary government regulatory approval on its expected timeline or at all, and approved products may not prove commercially viable.

The Company operates in an environment of rapid change in technology and competition.

The impact of the COVID-19 pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy , as well as businesses and capital markets around the world.

Impacts to the Company’s business as a result of COVID-19 include the temporary disruption of transplant procedures at many of the organ transplant centers that purchase OCS products;

disruptions to the Company’s manufacturing operations and supply chain caused by facility closures, reductions in operating hours, staggered shifts and other social distancing efforts;

labor shortages;

decreased productivity and unavailability of materials or components;

restrictions on or delays of the Company’s clinical trials and studies;

delays of reviews and approvals by the Food and Drug Administration (“FDA”) and other health authorities;

limitations on its employees’ and customers’ ability to travel, and delays in product installations, trainings or shipments to and from affected countries and within the United States .

In response to the pandemic, healthcare providers have, and may need to further, reallocate resources, such as physicians, staff, hospital beds and intensive care unit facilities, and these actions significantly delay the provision of other medical care such as organ transplantation and reduce the number of transplant procedures that are performed, which negatively impacts the Company’s revenue and clinical trial activities.

The Company’s sales and clinical adoption team has been and may continue to be restricted in visiting many transplant centers in person.

The Company plans to maintain these or similar restrictions until it believes employees can fully resume such activities in accordance with federal, state and local requirements.

In addition, the Company had temporarily reduced the manufacturing and distribution of its OCS products at its facility in Andover, Massachusetts.

Starting in May 2020, the Company resumed manufacturing and distribution operations to pre-COVID levels.

While the Company maintains an inventory of finished products and raw materials used in its OCS products, a prolonged pandemic could lead to shortages in the raw materials necessary to manufacture its products.

The COVID-19 pandemic also has impacted operations at the FDA and other health authorities, resulting in delays of reviews and approvals, including with respect to the Company’s OCS Heart Pre-Market Approval (“PMA”) application, and may affect other potential PMA applications.

While the COVID-19 pandemic did not significantly impact the Company’s business or results of operations during the first quarter of 2020, OCS product sales have been negatively impacted by the COVID-19 pandemic since the second quarter of 2020 and the Company anticipates a negative impact to OCS product sales in 2021.

The extent of the future impact on the Company’s operations and financial condition will depend on the length and severity of the pandemic, its consequences, and containment and vaccination efforts.

While the FDA approved emergency use authorization of vaccines in December 2020, it is expected to take several months for widespread vaccinations to occur and it is not yet known how vaccination efforts will impact the COVID-19 pandemic .

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

3 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the valuation of inventory, the valuation of common stock prior to the IPO, the valuation of stock-based awards and the valuation of the preferred stock warrant liability.

The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

1 unchanged sentence

Changes in estimates are recorded in the period in which they become known.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods.

As of the date of issuance of these consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update estimates, judgments or revise the carrying value of any assets or liabilities.

Actual results may differ from those estimates or assumptions.

Risk of Concentrations of Credit, Significant Customers and Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable.

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable.

The Company has not experienced any other-than-temporary losses with respect to its cash, cash equivalents and marketable securities and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company’s marketable securities as of December 28, 2019 consisted of U.S.

Treasury securities and U.S.

government agency bonds.

The Company had no marketable securities as of December 29, 2018.

Significant customers are those that accounted for 10% or more of the Company’s total revenue or accounts receivable (see Note 16).

Significant customers are those that accounted for 10% or more of the Company’s total revenue or accounts receivable.

For the fiscal year ended December 31, 2020, two customers represented 14% and 10% of net revenue, respectively.

For the fiscal year ended December 28, 2019, no customer accounted for 10% or more of net revenue.

As of December 31, 2020, one customer accounted for 30% of accounts receivable.

As of December 28, 2019, no customer accounted for 10% or more of accounts receivable.

Certain of the components and subassemblies included in the Company’s products are obtained from a sole source, a single source or a limited group of suppliers.

Although the Company seeks to reduce dependence on those limited sources of suppliers and manufacturers, the partial or complete loss of certain of these sources could have a material adverse effect on the Company’s operating results, financial condition and cash flows and damage its customer relationships.

Deferred Offering Costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.

After consummation of an equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of common stock generated as a result of the offering.

Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.

The Company recorded deferred offering costs of $3.4 million as of December 29, 2018.

Upon closing of the IPO on May 6, 2019, these deferred offering costs were included in the $6.0 million issuance costs classified to stockholders’ equity (deficit) and recorded against the proceeds from the offering.

Deferred Financing Costs

51 unchanged sentences

At the end of each reporting period, the Company assesses whether losses should be accrued on long-term manufacturing purchase commitments in accordance with Accounting Standards Codification (“ASC”) 330, Inventory , which requires that losses that are expected to arise from firm, noncancelable and unhedged commitments for the future purchase of inventory, measured in the same way as inventory losses, should be recognized in the current period in the statement s of operations unless they are deemed recoverable through firm sales contacts or when there are other circumstances that reasonably assure continuing sales without price decline.

As of the end of each reporting period presented in the accompanying consolidated financial statements, the Company did not identify any potential losses arising from remaining future purchase commitments as compared to estimated future customer sales through the remainder of the term of the manufacturing purchase commitment and, as a result, did not recognize any loss provision for future-period remaining purchase commitments for the fiscal year ended December 28, 2019 .

As of the end of each reporting period presented in the accompanying consolidated financial statements, the Company did not identify any potential losses arising from remaining future purchase commitments as compared to estimated future customer sales through the remainder of the term of the manufacturing purchase commitment and, as a result, did no t recognize any loss provision for future-period remaining purchase commitments for the fiscal year ended December 31, 2020 .

Deferred Rent

9 unchanged sentences

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and marketable securities consisting of money market funds, U.S.

Treasury securities and U.S.

government agency bonds, and its preferred stock warrant liability are carried at fair value, determined according to the fair value hierarchy described above (see Note 4).

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3).

The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

The carrying value of the Company’s long-term debt approximates its fair value at each balance sheet date due to its variable interest rate, which approximates a market interest rate.

The carrying value of the Company’s long-term debt approximates its fair value (a level 2 measurement) at each balance sheet date due to its variable interest rate, which approximates a market interest rate.

Marketable Securities

5 unchanged sentences

No such adjustments were necessary during the periods presented.

Classification of Convertible Preferred Stock

The Company’s previously issued convertible preferred stock (series A-1, B-1, C, D, E and F) is classified outside of stockholders’ equity (deficit) on the consolidated balance sheet because the holders of such shares had liquidation rights in the event of a deemed liquidation that, in certain situations, was not solely within the control of the Company.

Preferred Stock Warrant Liability

The Company classified warrants for the purchase of shares of its convertible preferred stock (see Notes 3 and 9) as a liability on its consolidated balance sheets as these warrants were freestanding financial instruments that could have required the Company to transfer assets upon exercise.

The warrant liability was initially recorded at fair value upon the date of issuance of each warrant and was subsequently remeasured to fair value at each reporting date.

Changes in the fair value of the warrant liability were recognized as a component of other income (expense) in the consolidated statements of operations.

On May 6, 2019, immediately prior to the closing of the IPO, these warrants were converted into warrants to purchase common stock and the fair value of the warrant liability at that time was reclassified to common stock.

As a result, subsequent to the closing of the IPO, the Company no longer remeasures the fair value of the warrant liabilities at each reporting date.

Segment Information

60 unchanged sentences

The Company has also determined that payments made to customers to obtain information related to post-approval studies or existing standard-of-care protocols (i.e., unrelated to the Company’s OCS products) do meet the criteria to be classified as a cost because the Company receives a distinct good or service transferred by the customer separate from the customer’s purchase of the Company’s OCS products and the consideration paid represents the fair value of the distinct good or service received by the Company.

As a result, these payments made to the customers for information related to post-approval studies or standard-of-care protocols are recorded as research, development, and clinical trials expenses.

The Company recorded payments made to customers related to post-approval studies and for documentation related to existing standard-of-care protocols of $1.2 million and $0.6 million for the fiscal years ended December 28, 2019 and December 29, 2018, respectively, as research, development, and clinical trials expenses.

As a result, these payments made to the customers for information related to post-approval studies or standard-of-care protocols are recorded as operating expenses.

The Company recorded payments made to customers related to post-approval studies and for documentation related to existing standard-of-care protocols of $1.6 million and $1.2 million for the fiscal years ended December 31, 2020 and December 28, 2019 , respectively, as operating expenses.

Variable Consideration

1 unchanged sentence

The Company only includes estimated variable amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Revenue from reimbursements of out-of-pocket expenses, including travel, lodging, and meals, is accounted for as variable consideration.

Revenue from reimbursements of out-of-pocket expenses, including travel, lodging, and meals, is accounted for as variable consideration and is insignificant.

The Company does not consider shipping to be a contract performance obligation.

10 unchanged sentences

The Company generally satisfies performance obligations within one year of the contract inception date.

As of December 28, 2019 and December 29, 2018, the Company’s wholly- or partially-unsatisfied performance obligations totaled $0.7 million and $1.5 million, respectively.

As of December 31, 2020 , the Company’s wholly- or partially unsatisfied performance obligations totaled $0.8 million and are expected to be completed within the next year.

Disaggregated Revenue

1 unchanged sentence

The reconciliation of gross revenue to net revenue for these certain payments is shown below (in thousands):

Fiscal Year Ended

Gross revenue from sales to customers

2 unchanged sentences

The Company disaggregates revenue from contracts with customers by product type and geographical area as it believes this presentation best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic factors, as shown below (in thousands):

Fiscal Year Ended

Net revenue by OCS product:

3 unchanged sentences

Total net revenue

Net revenue by geography:

Fiscal Year Ended

Net revenue by country (1):

United States

Outside the U.S.

All other countries

Total net revenue

Practical Expedients Used in Application of ASC 606

The Company has elected to apply the practical expedient for immaterial goods and services in the context of the contract.

Accordingly, the Company does not assess whether promised goods or services are performance obligations if they are deemed immaterial in the context of the contract with the customer.

The Company has elected to apply the practical expedient for shipping.

Accordingly, the Company does not consider shipping to be a contract performance obligation.

When applicable, the Company has elected to apply the practical expedient for considering the existence of a significant financing component.

Accordingly, the Company does not adjust the promised amount of arrangement consideration for the effects of a significant financing component if it expects, at contract inception, that the period of time between the Company’s transfer of a promised good or service to a customer and the customer’s payment for that good or service will be one year or less.

Net revenue by country is categorized based on the location of the end customer.

Other Revenue Considerations

The Company does not assess whether promised goods or services are performance obligations if they are deemed immaterial in the context of the contract with the customer.

Additionally, the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

The Company markets and sells its products primarily through its direct sales force, which sells its products to end customers globally.

22 unchanged sentences

The Company also incurs transaction gains and losses resulting from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.

Foreign currency transaction gains (losses) are included in the consolidated statements of operations as a component of other income (expense) and totaled $(0.2) million for each of the fiscal years ended December 28, 2019 and December 29, 2018.

Realized and unrealized foreign currency transaction gains (losses) are included in the consolidated statements of operations as a component of other income (expense) and totaled $1.0 million and $(0.2) million for the fiscal years ended December 31, 2020 and December 28, 2019, respectively.

Stock-Based Compensation

The Company measures stock-based option awards granted to employees, non-employees and directors based on their fair value on the date of grant using the Black-Scholes option-pricing model.

Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award.

Generally, the Company issues awards with only service-based vesting conditions and records the expense for these awards using the straight-line method.

Generally, the company issues awards with only service-based vesting conditions.

Compensation expense for those awards is recognized over the vesting period of the respective award using the straight-line method.

The Company accounts for forfeitures as they occur and records compensation cost assuming all option holders will complete the requisite service period.

If an award is forfeited, the Company reverses compensation expense previously recognized in the period the award is forfeited.

Prior to the adoption of Accounting Standards Update (“ASU”) 2018-07 on December 30, 2018 discussed below, the Company measured the fair value of stock-based option awards granted to non-employee consultants on the date that the related service was complete, which was generally the vesting date.

Prior to the service completion date, compensation expense was recognized over the period during which services were rendered by such non-employee consultants.

At the end of each financial reporting period prior to completion of the service, the fair value of these awards was remeasured using the then-current fair value of the Company’s common stock and updated assumption inputs in the Black-Scholes option-pricing model.

When the unvested portion of an award is forfeited, the Company reverses compensation expense previously recognized in the period of the forfeiture.

The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

5 unchanged sentences

Net Income (Loss) per Share

Prior to closing of the IPO, the Company followed the two-class method when computing net income (loss) per share, as TransMedics had issued shares that meet the definition of participating securities.

Prior to closing of the IPO, the Company followed the two-class method when computing net income (loss) per share, as TransMedics had issued shares that met the definition of participating securities.

The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period.

Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

The outstanding convertible preferred stock contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company.

Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities.

In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Accordingly, in periods in which the Company reported a net loss, such losses were not allocated to such participating securities, and as a result, basic and diluted net loss per share were the same.

Subsequent to the closing of its IPO, the Company only has one class of shares outstanding and basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period.

2 unchanged sentences

The Company reported a net loss attributable to common stockholders for each of the fiscal years ended December 31, 2020 and December 28, 2019.

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated above because including them would have had an anti-dilutive effect:

Warrants to purchase common stock

Options to purchase common stock

Employee stock purchase plan

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company's tax returns.

8 unchanged sentences

The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”).

ASC 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance.

The new standards require entities to apportion consideration from contracts to performance obligations on a relative standalone selling price basis, based on a five-step model.

Under ASC 606, revenue is recognized when a customer obtains control of a promised good or service and is recognized in an amount that reflects the consideration that the entity expects to receive in exchange for the good or service.

In addition, ASC 606 provides guidance on accounting for certain revenue related costs, including costs associated with obtaining and fulfilling a contract.

The Company adopted ASC 606 on December 30, 2018, applied using the modified retrospective method.

Under this method, (i) the new guidance is applied to customer contracts that are not yet completed as of December 29, 2018, with the cumulative effect of initially applying the new guidance recorded as an adjustment to accumulated deficit on the effective date of adoption, and (ii) the Company’s historical results for all periods prior to December 30, 2018 are not adjusted.

The Company did not elect to apply any permitted practical expedients as part of its adoption.

The Company’s adoption of ASC 606 did not substantially change the revenue recognition of its OCS products as applied under the prior revenue guidance, ASC 605, and, as a result, the adoption did not have a material impact on the Company’s consolidated financial statements.

Accordingly, transitional disclosures were not presented.

The Company’s revenue accounting policies related to ASC 605, which were applied in its reported amounts presented for all periods prior to December 30, 2018, were unchanged.

In June 2018, the FASB issued ASU No.

2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”).

ASU 2018-07 is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation.

For public entities, ASU 2018-07 was required to be adopted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years.

For nonpublic entities, ASU 2018-07 is effective for annual periods beginning after December 15, 2019.

Early adoption is permitted for all entities but no earlier than the Company’s adoption of ASU 2014-09.

The Company early-adopted ASU 2018-07 on December 30, 2018 and the adoption did not have a material impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements

12 unchanged sentences

In November 2019, the FASB issued ASU No.

ASU 2019-10, which deferred the effective date for nonpublic entities to annual reporting periods beginning after December 15, 2020 , and interim periods within fiscal years beginning after December 15, 2021.

The Company is planning to adopt ASU 2016-02 in its fiscal year 2021, which begins on December 29, 2020, in accordance with the nonpublic company requirements.

The Company is currently evaluating the method of adoption of this guidance and the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.

2019-10, which deferred the effective date for nonpublic entities to annual reporting periods beginning after December 15, 2020 , and interim periods within fiscal years beginning after December 15, 2021.

In June 2020, the FASB issued ASU No.

2020-05, which grants a one-year effective-date delay for nonpublic entities to annual reporting periods beginning after December 15, 2021 and to interim periods within fiscal years beginning after December 15, 2022.

The Company is currently planning to adopt this guidance on January 1, 2022 in accordance with the nonpublic company requirements and is evaluating the method of adoption and the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326) .

8 unchanged sentences

Early application continues to be allowed .

The Company is currently assessing the impact of the adoption of this guidance on its financial statements.

The Company is currently assessing the date of adoption and the impact of the adoption of this guidance on its consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12 , Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740) .

The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles as well as clarifying and amending existing guidance to improve consistent application.

For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2020 and for interim periods within those fiscal years.

For nonpublic entities, the guidance is effective for annual reporting periods beginning after December 15, 2021 and to interim periods within fiscal years beginning after December 15, 2022.

Early adoption is permitted for all entities.

Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis.

The Company is currently assessing the date of adoption and the impact of the adoption of this guidance on its consolidated financial statements.

Marketable Securities and Fair Value Measurements

2 unchanged sentences

Treasury securities (due within one year)

government agency bonds (due within one year)

The Company had no marketable securities as of December 29, 2018.

government agency bonds (due within

December 28, 2019

Treasury securities (due within one year)

government agency bonds (due within

The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis (in thousands):

8 unchanged sentences

Money market funds

Preferred stock warrant liability

Marketable securities:

Treasury securities

government agency bonds

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.

1 unchanged sentence

government agency bonds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy.

There were no transfers between Level 1, Level 2 and Level 3 during the fiscal years ended December 28, 2019, and December 29, 2018.

The preferred stock warrant liability in the table above consisted of the fair value of warrants to purchase Series D and Series F convertible preferred stock (see Note 9) and was based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy.

The Company’s valuation of the preferred stock warrants utilized the Black-Scholes option-pricing model, which incorporated assumptions and estimates to value the preferred stock warrants.

The Company assesses these assumptions and estimates on a quarterly basis as additional information impacting the assumptions was obtained.

Changes in the fair value of the preferred stock warrants were recognized as other income (expense) in the consolidated statements of operations.

On May 6, 2019, immediately prior to the closing of the IPO, the warrants to purchase preferred stock were converted into warrants to purchase common stock, and the fair value of the warrant liability at that time was reclassified to common stock.

As a result, subsequent to the closing of the IPO, the Company no longer remeasures the fair value of the warrant liability at each reporting date.

The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the preferred stock warrant liability include d the fair value per share of the underlying Series D and Series F convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock.

The most significant assumption in the Black-Scholes option-pricing model impacting the fair value of the preferred stock warrants was the fair value of the Company’s convertible preferred stock as of each remeasurement date.

The Company determine d the fair value per share of the underlying preferred stock by taking into consideration the most recent sales of its convertible preferred stock, results obtained from third-party valuations and additional factors that the Company deem ed relevant.

As of December 29, 2018, the fair value of each share of Series D and Series F convertible preferred stock was $6.21 per share and $5.73 per share, respectively.

The Company historically was a private company and lack ed company-specific historical and implied volatility information of its stock.

Therefore, it estimate d its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants.

The risk-free interest rate was determined by reference to the U.S.

Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants.

The Company ha d estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company ha d never paid or declared dividends.

Based on the terms and conditions of the warrants and pursuant to the Corporate Reorganization, immediately prior to the closing of the Company’s IPO on May 6, 2019, the preferred stock warrants converted to common stock warrants.

On that date, the Company remeasured the warrants and reclassified the total carrying value to stockholders’ equity (deficit).

The Company performed the final measurement of the warrants using the fair value of the underlying common shares of $27.41 per share on May 6, 2019 and recorded the change in fair value in other income (expense), net in the consolidated statements of operations.

The following table provides a roll-forward of the aggregate fair values of the Company’s preferred stock warrants for which fair value is determined by Level 3 inputs (in thousands):

Preferred Stock

Warrant Liability

Fair value at December 30, 2017

Change in fair value

Fair value at December 29, 2018

Change in fair value

Reclassification of warrant liability to equity upon

initial public offering

Fair value at December 28, 2019

During the fiscal years ended December 31, 2020 and December 28, 2019, there were no transfers between Level 1, Level 2 and Level 3.

Inventory consisted of the following (in thousands):

19 unchanged sentences

Accrued expenses and other current liabilities consisted of the following (in thousands):

Accrued research, development and clinical trials

Accrued research, development and clinical trial expenses

Accrued payroll and related expenses

Accrued financing fees (Note 13)

Accrued financing fees

Accrued professional fees

Accrued premium for manufacturing contract (Note 13)

Accrued other

7 unchanged sentences

Long-term debt, net of discount and current portion

Hercules Loan and Security Agreement

The Company had a loan agreement, entered into in 2015, and amended in 2016 (collectively, the “Amended Loan Agreement”) with Hercules Technology Growth Capital, Inc.

(“Hercules”).

The Amended Loan Agreement provided for borrowings of $8.5 million under a term loan, all of which was borrowed by the Company prior to 2016.

Borrowings under the Amended Loan Agreement bore interest at an annual rate equal to the greater of (i) 9.55% plus The Wall Street Journal prime rate minus 4.25% or (ii) 9.55%.

Borrowings under the Amended Loan Agreement were repayable in monthly interest-only payments through December 2017 and in equal monthly payments of principal and accrued interest from January 2018 until the maturity date in February 2020.

The Company was also required to make an end-of-term payment of $0.5 million upon the earlier of the payment of all obligations under the Amended Loan Agreement or the maturity date in February 2020.

In connection with entering into the Amended Loan Agreement, Hercules received a warrant to purchase 34,068 shares of Series F convertible preferred stock, at an exercise price of $4.99 per share, exercisable immediately.

The fair value of the warrant on the issuance date of $0.1 million was recorded as a debt discount and as a component of the preferred stock warrant liability.

On May 6, 2019, immediately prior to the closing of our IPO, the warrants to purchase preferred stock were converted into warrants to purchase common stock.

The warrants for common stock will expire in May 2024.

In June 2018, the Company repaid all amounts due under the Amended Loan Agreement, including $6.7 million of principal repayments, and the Amended Loan Agreement was terminated.

Upon prepayment of the outstanding amounts, the Company recorded a loss on extinguishment of debt of $0.3 million, which was classified as other expense in the consolidated statements of operations.

OrbiMed Credit Agreement

In June 2018, the Company entered into a credit agreement (the “Credit Agreement”) with OrbiMed Royalty Opportunities II, LP (“OrbiMed”) pursuant to which OrbiMed made certain term loans available to the Company.

5 unchanged sentences

Borrowings under the Credit Agreement are repayable in quarterly interest-only payments until the maturity date, at which time all principal and accrued interest is due and payable.

At its option, the Company may prepay outstanding borrowings under the Credit Agreement, subject to a prepayment premium of 9.0% of the principal amount of any prepayment within the first three years, which percentage decreases annually until it reaches zero at the end of three years.

At its option, the Company may prepay outstanding borrowings under the Credit Agreement, subject to a prepayment premium that decreases annually.

The current prepayment premium is 4.5% and will decrease to zero in June 2021.

The Company is also required to make a final payment in an amount equal to 3.0% of the principal amount of any prepayment or repayment.

The final payment is being accreted to interest expense over the term of the Credit Agreement using the effective interest method.

The final payment and debt discount amounts are being accreted to interest expense over the term of the Credit Agreement using the effective interest method.

In connection with entering into the Credit Agreement, the Company paid OrbiMed an upfront fee of $0.9 million and paid other costs to OrbiMed and third parties of $0.7 million, both of which were recorded by the Company as a debt discount.

3 unchanged sentences

Under the Credit Agreement, the Company has agreed to certain affirmative and negative covenants to which it will remain subject until maturity.

The covenants include maintaining a minimum liquidity amount of $3.0 million;

The financial covenants include maintaining a minimum liquidity amount of $3.0 million;

the requirement, on an annual basis, to deliver to OrbiMed annual audited financial statements with an unqualified audit opinion from the Company’s independent registered public accounting firm;

5 unchanged sentences

and engaging in certain other business transactions.

As of December 28, 2019, the Company was in compliance with all covenants of the Credit Agreement.

As of December 31, 2020, the Company was in compliance with the financial covenants under the Credit Agreement.

The obligations under the Credit Agreement are subject to acceleration upon the occurrence of specified events of default, including payment default, change in control, bankruptcy, insolvency, certain defaults under other material debt, certain events with respect to governmental approvals (if such events could cause a material adverse change in the Company’s business), failure to comply with certain covenants, including the minimum liquidity and unqualified audit opinion covenants, and a material adverse change in the Company’s business, operations or other financial condition.

6 unchanged sentences

The Company determined that all features of the Credit Agreement are either clearly and closely associated with a debt host or have a de minimis fair value and, as such, do not require separate accounting as a derivative liability.

As of December 28, 2019, the interest rate applicable to borrowings under the Credit Agreement was 10.63%.

During the fiscal year ended December 28, 2019, the weighted average effective interest rate on outstanding borrowings under the Credit Agreement was approximately 12.36%.

As of December 31, 2020 and December 28, 2019, the interest rate applicable to borrowings under the Credit Agreement was 9.5% and 10.6%, respectively.

During the fiscal years ended December 31, 2020 and December 28, 2019, the weighted average effective interest rate on outstanding borrowings under the Credit Agreement was approximately 11.2% and 12.4%, respectively.

Paycheck Protection Program Loan

On April 20, 2020, TransMedics issued a Promissory Note to Bank of America, NA, pursuant to which it received loan proceeds of $2.2 million (the “Loan”) provided under the Paycheck Protection Program established under the Coronavirus Aid, Relief, and Economic Security Act and guaranteed by the U.S.

Small Business Administration (the “Paycheck Protection Program”).

However, based on updated guidance related to this program, the Company decided to repay the full amount of the Loan, and repaid the Loan on May 1, 2020.

The Loan was unsecured, was scheduled to mature on April 20, 2022, had a fixed interest rate of 1.0% per annum and was subject to the standard terms and conditions applicable to loans administered under the Paycheck Protection Program.

Convertible Preferred Stock and Warrants

Convertible Preferred Stock

2 unchanged sentences

The Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock are collectively referred to as the “Preferred Stock”.

The Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock and Series C Preferred Stock were collectively referred to as the “Junior Preferred Stock”, a subset of the Preferred Stock.

Upon issuance of each class of Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities and determined that such features did not require the Company to separately account for these features.

The Company also concluded that no beneficial conversion feature existed on the issuance date of each class of Preferred Stock.

As of December 29, 2018, Preferred Stock consisted of the following (in thousands, except share amounts):

Preferred Stock

Issuable Upon

Series A-1 Preferred Stock

Series B Preferred Stock

Series B-1 Preferred Stock

Series C Preferred Stock

Series D Preferred Stock

Series E Preferred Stock

Series F Preferred Stock

Immediately prior to the closing of the IPO on May 6, 2019, pursuant to the Corporate Reorganization, all of the outstanding shares of convertible preferred stock of TransMedics were converted into an aggregate of 13,119,424 shares of common stock of TransMedics Group.

Warrants to Purchase Preferred Stock

In connection with prior debt agreements and amendments to such agreements, TransMedics had outstanding warrants to purchase shares of Series D Preferred Stock and Series F Preferred Stock as of December 29, 2018.

Immediately prior to the closing of the IPO on May 6, 2019, all of the outstanding shares of convertible preferred stock of TransMedics were converted into an aggregate of 13,119,424 shares of common stock of TransMedics Group.

TransMedics had outstanding warrants to purchase shares of Series D Preferred Stock and Series F Preferred Stock as of December 29, 2018.

The Company classified all of its preferred stock warrants as a liability on its consolidated balance sheets because the warrants were freestanding financial instruments that could require TransMedics to transfer assets upon exercise.

The liability associated with each of these warrants was initially recorded at fair value upon the issuance date of each warrant and subsequently remeasured to fair value at each reporting date.

The fair value of these warrants was determined using the Black-Scholes option-pricing model (see Note 3), and the resulting change in fair value of the warrant liability was recorded in other income (expense) in the Company’s consolidated statements of operations (see Note 3).

Immediately prior to the closing of the IPO on May 6, 2019, pursuant to the Corporate Reorganization, all of the outstanding preferred stock warrants of TransMedics were converted into warrants to purchase an aggregate of 64,440 shares of which warrants to purchase 50,000 shares of common stock at an exercise price of $8.75 per share expire on November 7, 2022 and warrants to purchase 14,440 shares of common stock at an exercise price of $17.47 per share have an expiration date of May 6, 2024.

Immediately prior to the closing of the IPO on May 6, 2019, all of the outstanding preferred stock warrants of TransMedics were converted into warrants to purchase an aggregate of 64,440 shares of which warrants to purchase 50,000 shares of common stock at an exercise price of $8.75 per share expire on November 7, 2022 and warrants to purchase 14,440 shares of common stock at an exercise price of $17.47 per share have an expiration date of May 6, 2024.

Upon conversion, the fair value of the warrant liability at that time was reclassified to common stock.

As a result, subsequent to the closing of the Company’s IPO, the Company will no longer remeasure the fair value of the warrant liability at each reporting date.

As a result, subsequent to the closing of the Company’s IPO, the Company no longer remeasures the fair value of the warrant liability at each reporting date.

On May 6, 2019, the Company filed a restated certificate of incorporation in the State of Massachusetts, which, among other things, restated the number of shares of all classes of stock that the Company has authority to issue to 175,000,000 shares, consisting of (i) 25,000,000 shares of preferred stock, no par value per share, and (ii) 150,000,000 shares of common stock, no par value per share.

6 unchanged sentences

Stock-Based Compensation

2014 and 2019 Stock Incentive Plan

The Company’s 2014 Stock Incentive Plan (the “2014 Plan”) permitted the Company to sell or issue incentive stock options or nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards to employees, directors, and non-employee consultants of the Company.

The 2014 Plan was administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors.

The exercise prices, vesting, and other restrictions were determined at the discretion of the board of directors, or its committee if so delegated.

Stock options granted under the 2014 Plan with service-based vesting conditions typically vest over three or four years and expire after ten years.

Following the effectiveness of the Company’s 2019 Stock Incentive Plan (the “2019 Stock Plan”) in April 2019, no future awards will be made under the 2014 Plan.

Additionally, shares underlying awards under the 2014 Plan that expire or are terminated, surrendered, or canceled without the delivery of shares will be available for future awards under the 2019 Stock Plan.

2019 Stock Incentive Plan and Options Grants:

On April 15, 2019, TransMedics Group’s board of directors adopted and its sole stockholder approved the 2019 Stock Plan, which became effective on that same date.

The 2019 Stock Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, unrestricted stock units, and other stock-based awards to employees, directors, and consultants of the Company and its subsidiaries.

The number of shares of common stock of TransMedics Group initially available for issuance under the 2019 Stock Plan was 3,428,571 shares, plus the number of shares underlying awards under the 2014 Plan (not to exceed 1,595,189 shares) that expire or are terminated, surrendered, or cancelled without the delivery of shares, are forfeited to or repurchased by TransMedics Group or otherwise become available again for grant under the 2014 Plan.

Shares withheld in payment of the exercise or purchase price of an award or in satisfaction of tax withholding requirements, and the shares covered by a stock appreciation right for which any portion is settled in stock, will reduce the number of shares available for issuance under the 2019 Stock Plan.

In addition, the number of shares available for issuance under the 2019 Stock Plan (i) will not be increased by any shares delivered under the 2019 Stock Plan that are subsequently repurchased using proceeds directly attributable to stock option exercises and (ii) will not be reduced by any awards that are settled in cash or that expire, become unexercisable, terminate or are forfeited to or repurchased by TransMedics Group without the issuance of stock under the 2019 Stock Plan.

2019 Stock Incentive Plan and Option Grants

On April 15, 2019, TransMedics Group’s board of directors adopted and its sole stockholder approved the 2019 Stock Incentive Plan (the “2019 Plan”), which became effective on that same date.

The 2019 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, unrestricted stock units, and other stock-based awards to employees, directors, and consultants of the Company and its subsidiaries.

The number of shares of common stock of TransMedics Group initially available for issuance under the 2019 Plan was 3,428,571 shares, plus the number of shares underlying awards under the previously outstanding 2014 Stock Incentive Plan (the “2014 Plan”), not to exceed 1,595,189 shares, that expire or are terminated, surrendered, or cancelled without the delivery of shares, are forfeited to or repurchased by TransMedics Group or otherwise become available again for grant.

Since the effectiveness of the Company’s 2019 Plan in April 2019, no future awards will be made under the 2014 Plan.

In addition, the number of shares available for issuance under the 2019 Plan (i) will not be increased by any shares delivered under the 2019 Plan that are subsequently repurchased using proceeds directly attributable to stock option exercises and (ii) will not be reduced by any awards that are settled in cash or that expire, become unexercisable, terminate or are forfeited to or repurchased by TransMedics Group without the issuance of stock under the 2019 Plan.

As of December 31, 2020, 2,447,687 shares of common stock were available for issuance under the 2019 Plan.

During the fiscal year ended December 28, 2019, the Company granted options to its employees and a director with service-based vesting for the purchase of an aggregate of 463,357 shares of common stock with a weighted average grant fair value of $8.55 per share.

During the fiscal year ended December 31, 2020, the Company granted options to its employees and a director with service-based vesting for the purchase of an aggregate of 603,336 shares of common stock with a weighted average grant-date fair value of $7.91 per share.

2019 Employee Stock Purchase Plan

1 unchanged sentence

A total of 371,142 shares of common stock of TransMedics Group are reserved for issuance under the 2019 ESPP as of December 31, 2020.

As of December 28, 2019, no shares have been issued under the 2019 ESPP and 371,142 shares remained available for issuance.

As of December 31, 2020, 22,697 shares have been issued under the 2019 ESPP and 348,445 shares remained available for issuance.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model.

The Company historically has been a private company and lacks company-specific historical and implied volatility information.

Prior to the IPO, the Company was a private company and lacks company-specific historical and implied volatility information.

Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

16 unchanged sentences

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of stock options exercised during the fiscal years ended December 28, 2019 and December 29, 2018 was $2.3 million and less than $0.2 million, respectively.

The aggregate intrinsic value of stock options exercised during the fiscal years ended December 31, 2020 and December 28, 2019, was $2.9 million and $2.3 million, respectively.

The weighted average grant-date fair value of stock options granted during the fiscal years ended December 31, 2020 and December 28, 2019 was $7.91 per share and $8.55 per share, respectively.

6 unchanged sentences

Selling, general and administrative expenses

As of December 28, 2019, total unrecognized compensation cost related to unvested employee and director stock-based awards was $3.8 million, which is expected to be recognized over a weighted average period of 2.75 years.

On December 22, 2017, the TCJA was signed into United States law.

The TCJA includes a number of changes to existing tax law, including, among other things, a permanent reduction in the federal corporate income tax rate from a top marginal tax rate of 35% to a flat rate of 21%, effective as of January 1, 2018, as well as limitation of the deduction for net operating losses to 80% of annual taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such net operating losses may be carried forward indefinitely).

The TCJA also transitions international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S.

These changes were effective January 1, 2018.

The TCJA also includes a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries’ previously untaxed foreign earnings, referred to as the Transition Toll Tax.

In connection with the initial analysis of the impact of the TCJA, the Company remeasured its deferred tax assets based on the rates at which they are expected to reverse in the future, which is generally 21% for federal tax purposes.

The remeasurement of the Company’s deferred tax assets was offset by a change in the valuation allowance.

As a result, no income tax expense or benefit was recognized as of the enactment date of the TCJA.

The FASB issued ASU 2018-05 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA.

As permitted by ASU 2018-05, the Company recorded provisional estimates of the impact of the TCJA as of December 22, 2017 and for the fiscal year ended December 30, 2017.

In December 2018, the Company finalized its accounting analysis of the impact of the TCJA based on the guidance, interpretations and data available during the fiscal year ended December 29, 2018.

As a result of finalizing the accounting analysis, the Company did not record any adjustments to the provisional amounts recorded in 2017.

During the fiscal years ended December 28, 2019 and December 29, 2018, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each year in the United States, due to its uncertainty of realizing a benefit from those items.

As of December 31, 2020, total unrecognized compensation cost related to unvested share-based awards was $5.9 million, which is expected to be recognized over a weighted average period of 2.5 years.

Tax Provision Components

During the fiscal years ended December 31, 2020 and December 28, 2019, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each year in the United States, due to the uncertainty regarding the realizability of these respective deferred tax assets.

The Company generated income in the Netherlands for the fiscal years ended December 31, 2020 and December 28, 2019 and, accordingly, recorded a foreign income tax provision of less than $ 0.1 million for each of the fiscal years ended December 31, 2020 and December 28, 2019.

Income (loss) before income taxes consisted of the following (in thousands):

Income Before Taxes

The domestic and foreign components of (loss) profit before income taxes were as follows (in thousands):

Fiscal Year Ended

7 unchanged sentences

Nondeductible items

Deferred tax effect of change in state blended rate

Return to provision

Change in deferred tax asset valuation allowance

10 unchanged sentences

Deferred tax liabilities:

Unrealized gain (loss)

Total deferred tax liabilities

16 unchanged sentences

As required by Accounting Standard Codification 740, management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards.

Management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets and, as a result, has a valuation allowance of approximately $95.0 million has been recorded.

Management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets and, as a result, a valuation allowance of approximately $101.0 million has been recorded.

During 2020, the Company recorded a net increase to its valuation allowance in the amount of $6.0 million primarily attributable to the current year operating loss and research credit generation for which the Company cannot provide a tax benefit.

The Company had no unrecognized tax benefits or related interest and penalties accrued for the fiscal years ended December 31, 2020 and December 28, 2019.

The Company's policy is to record any interest or penalties related to income taxes as part of the income tax provision.

The Company generated research credits for the tax years ending after December 31, 2001, but has not conducted a study to document qualified activities.

This study may result in an adjustment to the Company's research and development carryforwards;

however, until a study is completed and any adjustment is known, no amounts are being presented as an unrecognized tax benefit for the year ended December 31, 2020.

A full valuation allowance has been provided against the Company's research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research credit carryforward and the valuation allowance.

The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates.

1 unchanged sentence

There are currently no pending federal or state tax examinations.

The Company has open tax years subject to examination from FY 2016 to present;

however, carryforward attributes that were generated prior to December 28, 2014 may still be adjusted upon examination by federal, state, or local tax authorities if they either have been or will be used in a future period.

Changes in the valuation allowance for deferred tax assets during the fiscal years ended December 28, 2019 and December 29, 2018 related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards in 2019 and 2018 partially offset in 201 8 by a decrease in deferred tax assets resulting from the decreased federal corporate tax rate impact of the TCJA, and were as follows (in thousands):

The Company has open tax years subject to examination from fiscal year 2017 to present.

To the extent that the Company has carryforward attributes, the tax years in which the attribute was generated may still be adjusted upon examination by federal, state or local tax authorities if they either have been or will be used in the future.

Changes in the valuation allowance for deferred tax assets during the fiscal years ended December 31, 2020 and December 28, 2019 related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards in 2020 and 2019, and were as follows (in thousands):

Fiscal Year Ended

3 unchanged sentences

Valuation allowance as of end of year

As of December 28, 2019 and December 29, 2018, the Company had not recorded any amounts for unrecognized tax benefits.

The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

As of December 31, 2020 and December 28, 2019, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s consolidated statements of operations.

The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates.

In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable.

There are currently no pending tax examinations.

The Company is open to future tax examination under statute from 2016 to the present;

however, carryforward attributes that were generated prior to December 28, 2014 may still be adjusted upon examination by federal, state or local tax authorities if they either have been or will be used in a future period.

Commitments and Contingencies

1 unchanged sentence

The Company leases its office, laboratory and manufacturing space under two noncancelable operating leases that expire in December 2027.

The lease agreements include payment escalations, rent holidays and other lease incentives, which are accrued or deferred as appropriate such that rent expense for each lease is recognized on a straight-line basis over the respective lease terms, recording deferred rent for rent expense incurred but not yet paid (see Note 2).

Rent expense for the fiscal years ended December 28, 2019 and December 29, 2018 was $1.2 million and $1.2 million, respectively.

On January 9, 2020, the Company amended each of the lease agreements for its corporate headquarters (the “Amendment”) to lease an additional 39,744 square feet for general office use and an additional 11,735 square feet for operational use (the “Extension Premises”).

The Amendment also extended each of the existing lease terms from December 2021 to December 2026, with an option to extend for one additional period of five years.

Under the Amendment, the landlord will contribute up to $3.4 million towards the Company’s leasehold improvements.

The Amendment provides for annual base rent for the premises of approximately $1.9 million for the first year of the lease.

Thereafter, the annual base rent will increase at an average of 2.5% each year until the end of the term.

The Company is also obligated to pay the landlord certain costs, taxes, and operating expenses, subject to certain exclusions.

On June 2, 2020, the Company further amended each of the lease agreements (the “Second Amendment”).

The changes provided by the Second Amendment include (i) extending each of the existing lease terms for an additional year through December 31, 2027, (ii) delaying to October 23, 2020 the commencement of the Company’s occupation of the Extension Premises, and (iii) extending to December 23, 2021 the Company’s ability to utilize the contribution from the landlord toward the Company’s work on improvements of the premises.

The Second Amendment provides for annual base rent of approximately $2.0 million for the additional lease year and postponed the Company’s obligation to pay rent for the Extension Premises until October 23, 2020.

The Company’s lease agreements, as amended, include payment escalations, rent holidays and other lease incentives, which are accrued or deferred as appropriate such that rent expense for each lease is recognized on a straight-line basis over the respective lease terms, recording deferred rent for rent expense incurred but not yet paid.

The Company recorded rent expense of $1.8 million and $1.2 million in the fiscal years ended December 31, 2020 and December 28, 2019, respectively.

Costs incurred by the Company for tenant improvements but not yet reimbursed by the landlord are presented on the accompanying consolidated balance sheets as a tenant receivable within prepaid expenses and other current assets.

As of December 31, 2020, the Company did not have a tenant receivable.

Future minimum lease payments under operating leases as of December 31, 2020 are as follows (in thousands):

Fiscal Year Ending:

December 31, 2021

December 31, 2022

December 31, 2023

December 31, 2024

December 31, 2025

License Agreement with the Department of Veterans Affairs

5 unchanged sentences

patent covered by the VA license agreement, U.S.

The Company has been granted an interim patent term extension for this patent.

As of March 17, 2020, the issuance date of the consolidated financial statements as of December 28, 2019 and for the fiscal year then ended, the Company had not received final approval of the patent extension beyond the interim patent term extension already granted.

The Company has been granted an interim patent term extension for this patent until September 23, 2021.

The Company has not received final approval of the patent extension beyond the interim patent term extension already granted.

The maximum extension granted would be through May 2022;

however, the length of the patent term extension will be determined by the United States Patent and Trademark Office.

however, the length of the patent term extension will be determined by the United States Patent and Trademark Office (“USPTO”) based on input from the FDA.

On February 8, 2021, the FDA provided to the USPTO a determined regulatory review period for the OCS Lung.

Under the FDA’s analysis, the patent term extension of the ’082 patent would be until November 6, 2021 .

The license includes the right to grant sublicenses, subject to approval by the VA and other restrictions, and is subject to the U.S.

5 unchanged sentences

The Company is also responsible for all costs related to the amendment, prosecution and maintenance of the licensed patent rights.

The Company paid the VA royalties of $0.3 million and $0.2 million during the fiscal years ended December 28, 2019 and December 29, 2018, respectively.

The Company paid the VA royalties of $0.3 million during each of the fiscal years ended December 31, 2020 and December 28, 2019.

The Company also accrued VA royalties of $0.1 million as of December 31, 2020.

The VA license agreement can be terminated by the Company or the VA only if the other party fails to cure its material breach within a specified period after receiving notice of such breach.

Accrued Financing Fee

As of December 29, 2018, the Company was obligated to pay financing fees of $1.5 million to former financial advisors related to issuances of Series B preferred stock and Series D preferred stock in periods prior to 2016.

These financing fees were contingently payable in cash only upon an initial public offering or certain alternative transactions, including a sale of the company.

As a result of the IPO in May 2019, the Company became obligated to pay these previously accrued financing fees.

The Company settled the obligations in full during the third and fourth quarter of the fiscal year ended December 28, 2019.

401(k) Savings Plan

2 unchanged sentences

Company contributions to the plan may be made at the discretion of the board of directors.

As of December 28, 2019 and December 29, 2018, the Company had not made any contributions to the plan.

For the fiscal years ended December 31, 2020 and December 28, 2019, the Company had not made any contributions to the plan.

Indemnification Agreements

6 unchanged sentences

To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company is not currently aware of any indemnification claims and had not accrued any liabilities related to such obligations in its consolidated financial statements as of December 28, 2019 or December 29, 2018.

Unconditional Purchase Commitment

In January 2021, the Company entered into an unconditional $9.5 million purchase commitment, in the ordinary course of business, for goods with specified annual minimum quantities to be purchased through December 2029.

The contract is not cancellable without penalty.

Legal Proceedings

1 unchanged sentence

At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies.

The Company expense as incurred the costs related to such legal proceedings.

Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):

Fiscal Year Ended

Net loss attributable to common stockholders

Weighted average common shares outstanding, basic

Net loss per share attributable to common stockholders,

basic and diluted

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Fiscal Year Ended

Convertible preferred stock (as converted to common stock)

Warrants to purchase convertible preferred stock (as

converted to common stock)

Warrants to purchase common stock

Options to purchase common stock

The Company expenses as incurred the costs related to such legal proceedings.

Segment Reporting and Geographic Data

11 unchanged sentences

United States

United Kingdom

All other countries

Total net revenue

Fiscal Year Ended

Long-lived assets by country (2) :

4 unchanged sentences

The Company’s only long-lived assets consist of property and equipment, net of depreciation, which are categorized based on their location of domicile.

Significant Customer Concentrations

Significant customers are those that accounted for 10% or more of the Company’s net revenue or accounts receivable, as set forth in the following tables for the periods presented:

Fiscal Year Ended

Less than 10%

Accounts Receivable

Less than 10%

Related Party Transactions

5 unchanged sentences

Amira Hassanein $0.3 million and $0.2 million in total compensation in the fiscal years ended December 31, 2020 and December 28, 2019, respectively, for her services as an employee.

Subsequent Events

On January 9, 2020, the Company entered into an Omnibus Amendment #1 to Lease with respect to its corporate headquarters.

The Amendment, with terms effective retroactively to December 23, 2019, made certain changes to the Lease Agreements, dated June 25, 2004.

Pursuant to the Omnibus Amendment #1, the Company amended the Leases to include an additional 39,744 square feet for general office use and an additional 11,735 square feet of operational use.

The Company also extended the existing Lease term through December 31, 2026 with an option to extend the term of the Lease beyond the new expiration date for one additional period of five years.

In addition, under the amended Agreement, the Landlord will contribute $3.4 million toward the Company’s work on the improvement of the premises.

This Amendment provides for annual base rent for the existing and expansion premises of approximately $1.9 million for the first year of the Lease.

Thereafter, the annual base rent will increase at an average of 2.5% until the end of the term.

The Company is also obligated to pay the Landlord certain costs, taxes, and operating expenses, subject to certain exclusions.

On February 27, 2020, the Company’s Board of Directors approved a change in the Company’s fiscal year end from the last Saturday in December to December 31.

Following such change, the Company’s current fiscal year will end on December 31, 2020.

Effective with this change, the Company’s quarterly results will be for the three-month periods ending March 31, June 30, September 30 and December 31.

Selected Quarterly Results of Operations Data (Unaudited)

The following table sets forth the selected quarterly statements of operations data for each of the eight most recent fiscal quarters in the period ended December 28, 2019.

The selected quarterly statements of operations data have been prepared on the same basis as the audited consolidated financial statements and include all adjustments necessary to present fairly, in all material respects, the information set forth therein on a consistent basis.

2 unchanged sentences

The results of historical periods are not necessarily indicative of the results to be expected for a full year or any future period.

The following table sets forth the selected quarterly statements of operations data for each of the eight most recent fiscal quarters in the period ended December 31, 2020 (in thousands, except per share amounts):

Fiscal Three Months Ended

1 unchanged sentence

Net loss per share (basic and diluted)

Subsequent to the filing of its Form 10-Q for the quarterly period ended June 29, 2019, the Company discovered an error in the calculation of basic and diluted net loss per share attributable to common stockholders for the three and six months ended June 30, 2018.

The calculation of the weighted average number of common shares outstanding (basic and diluted) as originally reported had not appropriately reflected the 3.5-for-one conversion ratio applied to common stock in the Corporate Reorganization.

The correction of this error decreased the weighted average number of common shares outstanding (basic and diluted) for the three and six months ended June 30, 2018 from 4,686,080 and 4,676,991, respectively, (as reported) to 1,338,880 and 1,336,283, respectively, (as revised).

As a result, basic and diluted net loss per share attributable to common stockholders for the three and six months ended June 30, 2018 increased from $1.30 and $2.36, respectively, (as reported) to $4.57 and $8.24, respectively, (as revised).

Management of the Company has concluded that these revisions of basic and diluted net loss per share attributable to common stockholders are not material to the previously issued interim financial statements.

Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk