What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 134 added, 289 removed, 438 unchanged (49% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

September 30,

Current assets:

24 unchanged sentences

150,000,000 shares authorized;

shares and 21,184,524 shares issued and outstanding at September 30, 2020

shares and 27,175,305 shares issued and outstanding at March 31, 2021

and December 31, 2020, respectively

7 unchanged sentences

(In thousands, except share and per share amounts)

Fiscal Three Months Ended

Fiscal Nine Months Ended

September 30, 2020

September 28, 2019

September 30, 2020

September 28, 2019

Three Months Ended March 31,

Cost of revenue

6 unchanged sentences

Interest expense

Change in fair value of preferred stock warrant

Other income (expense), net

10 unchanged sentences

(In thousands)

Fiscal Three Months Ended

Fiscal Nine Months Ended

September 30, 2020

September 28, 2019

September 30, 2020

September 28, 2019

Other comprehensive income (loss):

Three Months Ended March 31,

Other comprehensive income:

Foreign currency translation adjustment

Unrealized gains (losses) on marketable securities,

Unrealized gains on marketable securities,

net of tax of $0

Total other comprehensive income (loss)

Total other comprehensive income

Comprehensive loss

1 unchanged sentence

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

Preferred Stock

Stockholders'

December 31, 2020

Issuance of common stock

upon the exercise of

common stock options

Issuance of common stock in

connection with employee

stock purchase plan

Stock-based compensation

Issuance of common stock upon the

exercise of common stock options

Issuance of common stock in connection

with employee stock purchase plan

Stock-based compensation expense

Foreign currency translation

Unrealized gains on

marketable securities

Unrealized gains on marketable

Balances at March 31, 2021

Issuance of common stock

upon the exercise of

common stock options

Issuance of common stock

in public offering, net of

discounts and issuance

costs of $628

Stock-based compensation

Foreign currency

translation adjustment

Unrealized losses on

marketable securities

Balances at June 30, 2020

Issuance of common stock

upon the exercise of

common stock options

Issuance of common stock in

connection with employee

stock purchase plan

Reversal of estimated

offering costs

Stock-based compensation

Foreign currency

translation adjustment

Unrealized losses on

marketable securities

September 30, 2020

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

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

Stockholders'

Convertible Preferred Stock

December 28, 2019

Issuance of common stock

upon the exercise of

common stock options

Stock-based compensation

Issuance of common stock upon the

exercise of common stock options

Issuance of common stock in connection

with employee stock purchase plan

Stock-based compensation expense

Foreign currency translation

Unrealized gains on marketable

Balances at March 31, 2020

Conversion of convertible

preferred stock into

common stock upon

initial public offering

Conversion of TransMedics'

common stock into

TransMedics Group's

common stock upon

corporate reorganization

Conversion of preferred

stock warrants into

common stock warrants

upon initial public

Issuance of common stock in

initial public offering, net

of discounts and issuance

costs of $5,966

Issuance of common stock

upon the exercise of

common stock options

Stock-based compensation

Foreign currency translation

Unrealized gains on

marketable securities

Balances at June 29, 2019

Issuance of common stock

upon the exercise of

common stock options

Settlement of accrued

financing fee

Stock-based compensation

Foreign currency translation

Unrealized gains on

marketable securities

September 28, 2019

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

2 unchanged sentences

(in thousands)

Fiscal Nine Months Ended

September 30, 2020

September 28, 2019

Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation expense

Change in fair value of preferred stock warrant liability

Non-cash interest expense and end of term accretion expense

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

Unrealized foreign currency transaction (gains) losses

Net amortization of premiums on marketable securities

Unrealized foreign currency transaction losses

Changes in operating assets and liabilities:

10 unchanged sentences

Proceeds from sales and maturities of marketable securities

Net cash used in investing activities

Net cash provided by investing activities

Cash flows from financing activities:

Payments of public offering costs and other financing costs

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

underwriting discounts and commissions

Proceeds from issuance of common stock upon exercise of stock options

1 unchanged sentence

purchase plan

Proceeds from Paycheck Protection Program loan

Repayment of Paycheck Protection Program loan

Net cash provided by financing activities

4 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Conversion of convertible preferred stock to common stock upon initial public offering

Settlement of accrued financing fee

Transfers of inventory to property and equipment

Reclassification of warrants to additional paid-in capital

Purchases of property and equipment included in accounts payable

Offering costs included in accounts payable and accrued expenses

Purchases of property and equipment included in accounts payable and accrued expenses

Reconciliation of cash, cash equivalents and restricted cash:

14 unchanged sentences

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

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.

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 $75.0 million, after deducting underwriting discounts and commissions as well as other offering costs of $0.6 million.

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 $22.4 million for the fiscal nine months ended September 30, 2020 and $33.5 million for the fiscal year ended December 28, 2019.

As of September 30, 2020, the Company had an accumulated deficit of $391.9 million.

The Company has incurred recurring losses since inception, including net losses attributable to the Company of $7.9 million for the three months ended March 31, 2021 and $28.7 million for the year ended December 31, 2020.

As of March 31, 2021, the Company had an accumulated deficit of $406.1 million.

The Company expects to continue to generate operating losses in the foreseeable future.

The Company believes that its existing cash, cash equivalents, and marketable securities of $132.7 million as of September 30, 2020 will be sufficient to fun d its operations, capital expenditures, and debt service payments for at least the next 12 months following the filing of this Quarterly Report on Form 10-Q.

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

The Company believes that its existing cash, cash equivalents, and marketable securities of $118.1 million as of March 31, 2021 will be sufficient to fund its operations, capital expenditures, and debt service payments for at least the next 12 months following the filing of this Quarterly Report on Form 10-Q.

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 shareholders.

If the Company is unable to obtain funding, the C ompany 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.

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 gover nment regulations, uncertainty of market acceptance of products, and the need to obtain additional financing to fund operations.

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.

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.

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.

13 unchanged sentences

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.

2 unchanged sentences

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 for the remainder of 2020;

however, the length and extent of the pandemic, its consequences, and containment efforts will determine the future impact on the Company’s operations and financial condition.

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 will end on December 31, 2020 and its current and each subsequent fiscal quarter will end on March 31, June 30 and September 30.

While the COVID-19 pandemic did not significantly impact the Company’s business or results of operations during the three months ended March 31, 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, the effects of any variants as new strains evolve 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 fully 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 accou nts of the Company and its wholly owned subsidiaries.

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

All intercompany accounts and transactions have been eliminated in consolidation.

3 unchanged sentences

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the fiscal year ended December 28, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of September 30, 2020 and results of operations for the fiscal three and nine months ended September 30, 2020 and September 28, 2019 and cash flows for the fiscal nine months ended in the same periods have been made.

The Company’s results of operations for the fiscal three and nine months ended September 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2021 and results of operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended in the same periods have been made.

The Company’s results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

Use of Estimates

12 unchanged sentences

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

For the fiscal three months ended September 30, 2020, two customers represented 12% and 14% of net revenue, respectively.

For the fiscal nine months ended September 30, 2020, two customers represented 13% and 12% of net revenue, respectively.

For the fiscal three months ended September 28, 2019, no customer accounted for 10% or more of net revenue.

For the fiscal nine months ended September 28, 2019, one customer represented 10% of net revenue.

As of September 30, 2020, two customers accounted for 14% each of accounts receivable.

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

For the three months ended March 31, 2021, two customers accounted for 12% each of net revenue.

For the three months ended March 31, 2020, one customer accounted for 17% of net revenue.

As of March 31, 2021, two customers accounted for 23% and 16% of accounts receivable, respectively.

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

18 unchanged sentences

No such adjustments were necessary during the periods presented.

Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.

The Company is developing and commercializing a proprietary system to preserve human organs for transplant in a near-physiologic condition to address the limitations of cold storage organ preservation.

Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the Company’s chief operating decision maker, or decision-making group, in deciding how to allocate resources and assess performance.

The Company has determined that its chief operating decision maker is its Chief Executive Officer.

The Company’s chief operating decision maker reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and assessing financial performance.

Revenue Recognition

9 unchanged sentences

A performance obligation is distinct if (1) the product or service is separately identifiable from other promises in the contract and (2) the customer can benefit from the product or service on its own or with other resources that are readily available to the customer.

When a customer order includes an OCS Console, whether sold or loaned, the Company has determi ned that customer training and the equipment set-up of the OCS Console, each performed by the Company, are not distinct because they are not sold on a standalone basis and can only be performed by the Company in conjunction with a sale or loan of its OCS C onsole.

When a customer order includes an OCS Console, whether sold or loaned, the Company has determined that customer training and the equipment set-up of the OCS Console, each performed by the Company, are not distinct because they are not sold on a standalone basis and can only be performed by the Company in conjunction with a sale or loan of its OCS Console.

In addition, the Company has determined that the OCS Console itself is not distinct because the customer cannot benefit from the OCS Console without the training and equipment set-up having been completed.

As a result, when the order includes an OC S Console, the Company has concluded that training, OCS Console equipment set-up, and the OCS Console itself are highly interdependent and represent a single, combined performance obligation.

Consequently, the Company does not recognize any revenue from an y component of a customer order that includes an OCS Console, whether sold or loaned, until the OCS Console has arrived at the customer site and the training and equipment set-up have been completed by the Company.

As a result, when the order includes an OCS Console, the Company has concluded that training, OCS Console equipment set-up, and the OCS Console itself are highly interdependent and represent a single, combined performance obligation.

Consequently, the Company does not recognize any revenue from any component of a customer order that includes an OCS Console, whether sold or loaned, until the OCS Console has arrived at the customer site and the training and equipment set-up have been completed by the Company.

The Company has concluded that “transfer of control” of an OCS Console occurs only after the console has arrived at the customer site and the training and equipment set-up have been completed by the Company.

7 unchanged sentences

To date, the amounts allocated to lease deliverables have been insignificant.

In determining SSP, the Company maximizes observable inputs and consider a number of data points, including:

In determining SSP, the Company maximizes observable inputs and considers a number of data points, including:

(1) the pricing of standalone sales (in instances where available), (2) the pricing established by management when setting prices for deliverables that are intended to be sold on a standalone basis, (3) contractually stated prices for deliverables that are intended to be sold on a standalone basis, and (4) other pricing factors, such as the geographical region in which the products are sold and expected discounts based on the customer size and type.

20 unchanged sentences

Reductions of revenue related to such payments made to customers for reimbursements are recognized when the Company recognizes the revenue for the sale of its OCS disposable sets.

The Company recorded the reimbursable clinical costs as a reduction of revenue of $0.9 million and $2.1 million for the fiscal three and nine months ended September 30, 2020, respectively, and $0.7 million and $1.8 million for the fiscal three and nine months ended September 28, 2019, respectively, as presented below in disaggregated revenue.

The Company recorded the reimbursable clinical costs as a reduction of revenue of $0.6 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively, as presented below in disaggregated revenue.

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 $0.3 million and $1.1 million for the fiscal three and nine months ended September 30, 2020, respectively, and $0.4 million and $0.9 million for the fiscal three and nine months ended September 28, 2019, 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 $0.5 million and $0.4 million for the three months ended March 31, 2021 and 2020, 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 was insignificant during each of the three months ended March 31, 2021 and 2020.

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

6 unchanged sentences

Contract assets arise from unbilled amounts in customer arrangements when revenue recognized exceeds the amount billed to the customer and the Company’s right to payment is not just subject to the passage of time.

The Company had no contract assets as of September 30, 2020 and December 28, 2019.

The Company had no contract assets as of March 31, 2021 and December 31, 2020.

Contract liabilities represent the Company’s obligation to transfer goods or services to a customer for which it has received consideration (or the amount is due) from the customer.

1 unchanged sentence

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

As of September 30, 2020, the Company’s wholly- or partially-unsatisfied performance obligations totaled $1.4 million and are expected to be completed within the next year.

As of March 31, 2021, the Company’s wholly- or partially-unsatisfied performance obligations totaled $0.9 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 Three Months Ended

Fiscal Nine Months Ended

September 30, 2020

September 28, 2019

September 30, 2020

September 28, 2019

Three Months Ended March 31,

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 Three Months Ended

Fiscal Nine Months Ended

September 30, 2020

September 28, 2019

September 30, 2020

September 28, 2019

Three Months Ended March 31,

Net revenue by OCS product:

3 unchanged sentences

Total net revenue

Fiscal Three Months Ended

Fiscal Nine Months Ended

September 30, 2020

September 28, 2019

September 30, 2020

September 28, 2019

Three Months Ended March 31,

Net revenue by country(1):

7 unchanged sentences

Additionally, t he 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 does not consider shipping to be a contract performance obligation.

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

6 unchanged sentences

The Company records revenue based on the amount of the discounted selling price.

When a sale to a distributor includes an OCS Console, the Company performs the training and OCS Co nsole equipment set-up for the end customer.

The Company recognizes no revenue from a distributor order that includes an OCS Console until the OCS Console has arrived at the customer site and the training and equipment set-up have been completed by the Com pany.

When a sale to a distributor includes an OCS Console, the Company performs the training and OCS Console equipment set-up for the end customer.

Stock-Based Compensation

5 unchanged sentences

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.

Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.

The Company has determined that its chief operating decision maker is its Chief Executive Officer.

The Company’s chief operating decision maker reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and assessing financial performance.

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 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.

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 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.

The Company reported a net loss attributable to common stockholders for the fiscal three and nine months ended September 28, 2019.

Under the two-class method, 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.

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.

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.

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

For periods in which the Company reports a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are no t assumed to have been issued if their effect is anti-dilutive.

The Company reported a net loss attributable to common stockholders for the fiscal three and nine months ended September 30, 2020.

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

The Company reported a net loss attributable to common stockholders for each of the three months ended and March 31, 2021 and 2020.

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:

As of March 31,

Warrants to purchase common stock

Options to purchase common stock

Employee stock purchase plan

Recently Issued Accounting Pronouncements

6 unchanged sentences

Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today.

For public entities, the guidance has been effective for annual reporting periods beginning after December 15, 2018 and for interim periods within those fiscal years.

For public entities, the guidance has been effective for annual reporting periods beginning after December 15, 2018 and for interim periods within those years.

ASU 2016-02 initially required adoption using a modified retrospective approach, under which all years presented in the financial statements would be prepared under the revised guidance.

3 unchanged sentences

In November 2019, the FASB issued ASU No.

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.

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

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 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.

4 unchanged sentences

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected.

For public entities except smaller reporting companies, the guidance is effective for annual reporting periods beginning after December 15, 2019 and for interim periods within those fiscal years.

For non-public entities and smaller reporting companies , the guidance was effective for annual reporting periods beginning after December 15, 2021.

For public entities except smaller reporting companies, the guidance is effective for annual reporting periods beginning after December 15, 2019 and for interim periods within those years.

For nonpublic entities and smaller reporting companies , the guidance was effective for annual reporting periods beginning after December 15, 2021.

Early adoption is permitted for all entities.

In November 2019, the FASB issued ASU No.

2019-10, which deferred the effective date for non-public entities to annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years.

2019-10, which deferred the effective date for nonpublic entities to annual reporting periods beginning after December 15, 2022, including interim periods within those years.

Early application continues to be allowed.

The Company is currently assessing the date of the adoption and 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

As of September 30, 2020 and December 28, 2019, marketable securities by security type consisted of the following (in thousands):

September 30, 2020

Marketable securities by security type consisted of the following (in thousands):

March 31, 2021

Treasury securities (due within one year)

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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):

Fair Value Measurements at September 30, 2020 Using:

Fair Value Measurements at March 31, 2021 Using:

Cash equivalents:

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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.

During the fiscal three and nine months ended September 30, 2020 and September 28, 2019, there were no transfers between Level 1, Level 2, and Level 3.

As of September 30, 2020 and December 28, 2019, inventory consisted of the following (in thousands):

September 30, 2020

During the three months ended March 31, 2021 and 2020, there were no transfers between Level 1, Level 2, and Level 3.

Inventory consisted of the following (in thousands):

March 31, 2021

December 31, 2020

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Finished goods

During the fiscal nine months ended September 30, 2020 and September 28, 2019, the Company made non-cash transfers of OCS Consoles from inventory to property and equipment (OCS Consoles loaned to customers) of $0.7 million and $1.9 million, respectively.

During the three months ended March 31, 2021 and 2020, the Company made non-cash transfers of OCS Consoles from inventory to property and equipment (OCS Consoles loaned to customers) of $0.4 million and $0.1 million, respectively.

Accrued Expenses and Other Current Liabilities

As of September 30, 2020 and December 28, 2019, accrued expenses and other current liabilities consisted of the following (in thousands):

September 30, 2020

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

March 31, 2021

December 31, 2020

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Accrued payroll and related expenses

Accrued professional fees

Accrued other

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TransMedics has a credit agreement (the “Credit Agreement”) with OrbiMed Royalty Opportunities II, LP (“OrbiMed”), entered into in June 2018, pursuant to which TransMedics borrowed $35.0 million.

As of September 30, 2020 and December 28, 2019, long-term debt consisted of the following (in thousands):

September 30, 2020

Long-term debt consisted of the following (in thousands):

March 31, 2021

December 31, 2020

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and engaging in certain other business transactions.

As of September 30, 2020, the Company was in complian ce with the financial covenants under the Credit Agreement.

As of March 31, 2021 , 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.

Upon the occurrence of an event of default and until such event of default is no longer continuing, the Applicable Margi n will increase by 4.0% per annum.

Upon the occurrence of an event of default and until such event of default is no longer continuing, the Applicable Margin will increase by 4.0 % per annum.

If an event of default (other than certain events of bankruptcy or insolvency) occurs and is continuing, OrbiMed may declare all or any portion of the outstanding principal amount of the borrowings plus accrued and unpaid interest to be due and payable.

Upon the occurrence of certain events of bankruptcy or insolvency, all of the outstanding principal amount of the borrowings plus accrued and unpaid interest will automatically become due and payable.

In addition, the Compa ny may be required to prepay outstanding borrowings, subject to certain exceptions, with portions of net cash proceeds of certain asset sales and certain casualty and condemnation events.

As of September 30, 2020, the interest rate applicable to borrowings under the Credit Agreement was 9.5%.

During the fiscal nine months ended September 30, 2020, the weighted average effective interest rate on outstanding borrowings under the Credit Agreement was approximately 11.2%.

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.

In addition, the Company may be required to prepay outstanding borrowings, subject to certain exceptions, with portions of net cash proceeds of certain asset sales and certain casualty and condemnation events.

As of March 31, 2021, the interest rate applicable to borrowings under the Credit Agreement was 9.5%.

During the three months ended March 31, 2021, the weighted average effective interest rate on outstanding borrowings under the Credit Agreement was approximately 11.2%.

Preferred Stock

As of September 30, 2020, the Company’s articles of organization authorized the Company to issue up to 25,000,000 shares of preferred stock, no par value per share, all of which is undesignated .

As of September 30, 2020, the Company’s articles of organization authorized the Company to issue up to 150,000,000 shares of common stock, no par value per share.

As of March 31, 2021, the Company’s articles of organization authorized the Company to issue up to 25,000,000 shares of preferred stock, no par value per share, all of which is undesignated .

As of March 31, 2021, the Company’s articles of organization authorized the Company to issue up to 150,000,000 shares of common stock, no par value per share.

Each share of common stock is entitled to one vote on all matters submitted to a vote of the Company’s shareholders.

The holders of common stock are entitled to receive dividends, if any, as may be declared by the board of directors.

Through September 30, 2020, no dividends had been declared or paid.

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 common stock.

No warrants have been exercised.

As a result, as of September 30, 2020, the Company has outstanding warrants to purchase 50,000 shares of common stock at an exercise price of $8.75 per share with an expiration date of November 7, 2022 and warrants to purchase 14,440 shares of common stock at an exercise price of $17.47 per share with an expiration date of May 6, 2024.

Through March 31, 2021, no dividends had been declared or paid.

As of March 31, 2021 , the Company has outstanding warrants to purchase 50,000 shares of common stock at an exercise price of $8.75 per share with an expiration date of November 7, 2022 and warrants to purchase 14,440 shares of common stock at an exercise price of $17.47 per share with an expiration date of May 6, 2024.

Stock-Based Compensation

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 Company’s 2019 Stock Incentive Plan (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.

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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 September 30, 2020, 2,465,687 shares of common stock were available for issuance under the 2019 Plan.

During the fiscal nine months ended September 30, 2020, the Company granted to its employees and its non-employee directors options with service-based vesting for the purchase of an aggregate of 585,336 shares of common stock with a weighted average grant fair value of $7.95 per share.

As of March 31, 2021, 1,656,055 shares of common stock were available for issuance under the 2019 Plan.

During the three months ended March 31, 2021, the Company granted options to its employees and directors with service-based vesting for the purchase of an aggregate of 793,975 shares of common stock with a weighted average grant-date fair value of $20.47 per share.

2019 Employee Stock Purchase Plan

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

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

During the fiscal nine months ended September 30, 2020, 22,697 shares of common stock were issued under the 2019 ESPP and as of September 30, 2020, 348,445 shares of common stock remained available for issuance.

Pursuant to the Company’s 2019 Employee Stock Purchase Plan (the “2019 ESPP”), certain employees of the Company are eligible to purchase common stock of the Company at a reduced price during offering periods.

The 2019 ESPP permits participants to purchase common stock using funds contributed through payroll deductions, subject to the limitations set forth in the Internal Revenue Code, at a purchase price of 85% of the lower of the closing price of the Company’s common stock on the first trading day of the offering period or the closing price on the applicable purchase date, which is the final trading day of the applicable offering period.

total of 371,142 shares of common stock of TransMedics Group are reserved for issuance under the 2019 ESPP.

During the three months ended March 31, 2021 , 14,951 shares of common stock were issued under the 2019 ESPP and as of March 31, 2021 , 333,494 shares of common stock remained available for issuance.

Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations (in thousands):

Fiscal Three Months Ended

Fiscal Nine Months Ended

September 30, 2020

September 28, 2019

September 30, 2020

September 28, 2019

Three Months Ended March 31,

Cost of revenue

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Selling, general and administrative expenses

As of September 30, 2020, total unrecognized compensation cost related to unvested share-based awards was $6.5 million, which is expected to be recognized over a weighted average period of 2.7 years.

As of March 31, 2021, total unrecognized compensation cost related to unvested share-based awards was $21.1 million, which is expected to be recognized over a weighted average period of 3.1 years.

Commitments and Contingencies

Operating Leases

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

Annual base rent for the premises is approximately $1.9 million for the period commencing on December 23, 2020 and ending December 22, 2021 and 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 postpones 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 $0.4 million and $0.3 million in each of the fiscal three months ended September 30, 2020 and September 28, 2019, respectively.

The Company recorded rent expense of $1.4 million and $1.0 million in each of the fiscal nine months ended September 30, 2020 and September 28, 2019, respectively.

The Company recorded rent expense of $0.5 million in each of the three months ended March 31, 2021 and 2020.

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

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 September 30, 2020, the Company had a tenant receivable of $0.2 million.

Future minimum lease payments under operating leases as of September 30, 2020 are as follows (in thousands):

As of March 31, 2021, the Company did not have a tenant receivable.

Future minimum lease payments under operating leases as of March 31, 2021 are as follows (in thousands):

December 31, 2021 (remaining 9 months)

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

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

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.

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

As of September 30, 2020 and December 28, 2019, the Company had not made any contributions to the plan.

As of March 31, 2021 and December 31, 2020, the Company had not made any contributions to the plan.

Indemnification Agreements

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

The Co mpany 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 September 30, 2020 and December 28, 2019.

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 March 31, 2021 and December 31, 2020.

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

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The Company expenses 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 Three Months Ended

Fiscal Nine Months Ended

September 30, 2020

September 28, 2019

September 30, 2020

September 28, 2019

Net loss attributable to common

Weighted average common shares

outstanding, basic and diluted

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.

September 30, 2020

September 28, 2019

Warrants to purchase common stock

Options to purchase common stock

Employee stock purchase plan

Segment Reporting and Geographic Data

The Company has determined that it operates in one segment (see Note 2 for disaggregated net revenue by geographical area).

Long-lived assets by geographical area is summarized as follows (in thousands):

September 30, 2020

Long-lived assets by geographical area are summarized as follows (in thousands):

March 31, 2021

December 31, 2020

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The Company paid Dr.

Amira Hassanein less than $0.1 million in total compensation for each of the fiscal three months ended September 30, 2020 and September 28, 2019, and $0.2 million in total compensation for each of the fiscal nine months ended September 30, 2020 and September 28, 2019, for her services as an employee.

Amira Hassanein $0.1 million and less than $0.1 million in total compensation for the three months ended March 31, 2021 and 2020, respectively, for her services as an employee.

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-Q

Item 1. Financial Statements