What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-03-01 compared with 2021-03-11 · 292 added, 334 removed, 595 unchanged (51% of the section changed)

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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 gains of $1.0 million during the fiscal year ended December 31, 2020.

We recognized foreign currency transaction losses of $1.0 million during the year ended December 31, 2021.

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

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dollars using average exchange rates in effect during each period.

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 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.

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

We recorded a foreign currency translation loss of less than $0.1 million during the year ended December 31, 2021.

For the year ended December 31, 2021, 25% of our net revenue and 6% of our operating costs and expenses were generated by subsidiaries whose functional currency is not the U.S.

dollar and therefore are subject to foreign currency exposure.

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An immediate 10% change in LIBOR would not have a material impact on our debt-related obligations, financial position or results of operations.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations.

If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.

Our inability or failure to do so could harm our business, financial condition or results of operations.

Financial Statement s and Supplementary Data.

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets

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Consolidated Statements of Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of TransMedics Group, Inc.

and its subsidiaries (the “Company”) as of December 31, 2020 and December 28, 2019, and the related consolidated statements of operations, of comprehensive loss, of convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and December 28, 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive loss, of convertible preferred stock and stockholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2021.

Basis for Opinions

The Company's management is responsible for these consolidated fi nancial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporti ng, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

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.

We conducted our audits i n accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements 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.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Emphasis of Matter

As disclosed in Note 8 to the consolidated financial statements, the Company has $35.0 million of debt maturing in June 2023.

Management’s evaluation of the events and conditions related to future funding are described in Note 1.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as

necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition

As described in Note 2 to the consolidated financial statements, the Company recorded $30.3 million in total revenues for the year ended December 31, 2021.

The Company generates revenue primarily from sales of its single-use, organ-specific disposable sets (i.e., its organ-specific OCS Perfusion Sets sold together with its organ-specific OCS Solutions) used on its organ-specific OCS Consoles, each being a component of the Company’s Organ Care System (OCS) products.

Substantially all of the Company’s customer contracts have multiple-performance obligations that contain deliverables consisting of OCS Perfusion Sets and OCS Solutions.

In some of those customer contracts, the deliverables also include an OCS Console, whether sold or loaned to the customer.

Management evaluates each promise within a multiple-performance obligation arrangement to determine whether it represents a distinct performance obligation.

Management has concluded that training, OCS Console equipment set-up, and the OCS Console itself are highly interdependent and represent a single, combined performance obligation.

Revenue is recognized when control of the OCS product or products is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for the product or products.

Control is transferred for the OCS products typically only after the product has arrived at the customer site and, in addition for OCS Consoles, the training and equipment set-up have been completed by the Company.

The principal considerations for our determination that performing procedures relating to revenue recognition is a critical audit matter are the high degree of auditor effort in performing procedures and in evaluating audit evidence related to management’s determination of the point in time when control of the OCS product or products is transferred to the customer and revenue is recognize d .

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the existence and point in time when control is transferred to the customer.

These procedures also included, among others, evaluating, for a sample of transactions, the existence of transactions recognized as revenue, as well as evaluating the appropriate timing of revenue recognition by obtaining and inspecting customer purchase orders and, where applicable, invoices, customer agreements, shipping documents and cash receipts from customers.

/s/ PricewaterhouseCoopers LLP

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CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(In thousands, except share amounts)

Current assets:

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Restricted cash

Operating lease right-of-use assets

Other long-term assets

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Deferred revenue

Current portion of deferred rent

Total current liabilities

Long-term debt, net of discount and current portion

Operating lease liabilities, net of current portion

Deferred rent, net of current portion

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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

27,791,615 shares and 27,175,305 shares issued and outstanding at December 31, 2021 and 2020, respectively

Accumulated other comprehensive loss

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(In thousands, except share and per share amounts)

Fiscal Year Ended

Year Ended December 31,

Cost of revenue

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Interest expense

Change in fair value of preferred stock warrant liability

Other income, net

Other income (expense), net

Total other expense, net

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(In thousands)

Fiscal Year Ended

Other comprehensive income (loss):

Year Ended December 31,

Other comprehensive loss:

Foreign currency translation adjustment

Unrealized gains (losses) on marketable securities, net of tax of $0

Total other comprehensive income (loss)

Unrealized losses on marketable securities, net of tax of $ 0

Total other comprehensive loss

Comprehensive loss

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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’

Equity (Deficit)

Balances at December 28, 2019

Conversion of convertible

preferred stock into common

stock upon initial public

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 upon

the exercise of common stock

Issuance of common stock in

initial public offering, net of

connection with employee stock

purchase plan

Issuance of common stock in

public offering, net of

discounts and issuance

costs of $ 585

Issuance of common stock upon

the exercise of common stock

Stock-based compensation

Settlement of accrued financing

Foreign currency translation

Unrealized gains on

Unrealized losses on

marketable securities

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stock purchase plan

Issuance of common stock

in public offering, net of

discounts and issuance

costs of $585

Stock-based compensation

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(In thousands)

Fiscal Year Ended

Year Ended December 31,

Cash flows from operating activities:

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Stock-based compensation expense

Change in fair value of preferred stock warrant liability

Non-cash interest and end of term accretion expense

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

Non-cash lease expense

Net amortization of premiums on marketable securities

Unrealized foreign currency transaction (gains) losses

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Deferred revenue

Operating lease liabilities

Deferred rent

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Proceeds from sales and maturities of marketable securities

Net cash used in investing activities

Net cash provided by (used) in investing activities

Cash flows from financing activities:

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

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

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

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Supplemental disclosure of non-cash investing and financing activities:

Conversion of convertible preferred stock to common stock upon

initial public offering

Transfers of inventory to property and equipment

Reclassification of warrant liability to equity upon initial public offering

Purchases of property and equipment included in accounts payable

Offering costs included in accounts payable and accrued expenses

Settlement of accrued financing fee

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

Reconciliation of cash, cash equivalents and restricted cash:

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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, 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 $28.7 million for the fiscal year ended December 31, 2020 and $33.5 million for the fiscal year ended December 28, 2019.

The Company has incurred recurring losses since inception, including net losses of $ 44.2 million and $ 28.7 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the Company had an accumulated deficit of $ 442.4 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 $125.6 million as of December 31, 2020 will be sufficient to fund operations, capital expenditures, and debt service payments for at least the next twelve months following the filing of this Annual Report on Form 10-K.

The Company believes that its existing cash, cash equivalents, and marketable securities of $ 92.5 million as of December 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 Annual Report on Form 10-K.

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

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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;

The impact of the COVID-19 pandemic has been and may continue to be extensive in many aspects of society, which has resulted in and may 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 have included the temporary disruption of transplant procedures at many of the organ transplant centers that purchase OCS products;

customer delays or reductions in customer capital expenditures and operating budgets and the related impact on our product sales;

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;

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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.

delays in the Company’s clinical trial enrollment;

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

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 COVID-19 pandemic also has impacted operations at the FDA and other health authorities, resulting in delays of reviews and approvals, and may affect other potential Pre-Market Approval (“PMA”) applications.

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

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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.

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.

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

For the year ended December 31, 2021, one customer accounted for 11 % of net revenue.

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

As of December 31, 2021, two customers accounted for 21 % and 15 % of accounts receivable, respectively.

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.

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Restricted Cash

As of December 31, 2020 and December 28, 2019, the Company maintained two letters of credit totaling $0.5 million for the benefit of the landlord of its leased property.

As of December 31, 2021 and 2020, the Company maintained two letters of credit totaling $ 0.5 million for the benefit of the landlord of its leased property.

The Company was required to maintain a separate cash balance of $ 0.5 million to secure the letters of credit.

Related to this separate cash balance, the Company classified $0.5 million as restricted cash (non-current) on its consolidated balance sheets as of December 31, 2020 and December 28, 2019.

The Company’s cash, cash equivalents and restricted cash was $25.1 million and $20.6 million for the years ended December 31, 2020 and December 28, 2019, respectively.

Related to this separate cash balance, the Company classified $ 0.5 million as restricted cash (non-current) on its consolidated balance sheets as of December 31, 2021 and 2020.

The Company’s cash, cash equivalents and restricted cash was $ 26.1 million and $ 25.1 million for the years ended December 31, 2021 and 2020, respectively.

Accounts Receivable

Accounts receivable are presented net of a provision for doubtful accounts, which is an estimate of amounts that may not be collectible.

The Company performs ongoing credit evaluations of its customers and, if necessary, provides an allowance for doubtful accounts and expected losses.

The Company writes off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues collection of the receivable.

As of December 31, 2020 and December 28, 2019, the Company had no allowance for doubtful accounts.

During the fiscal years ended December 31, 2020 and December 28, 2019, the Company did not record any provisions for doubtful accounts and did not write off any accounts receivable balances.

Accounts receivable are presented net of an allowance for credit losses, which is an estimate of amounts that may not be collectible.

The Company performs ongoing credit evaluations of its customers and monitors economic conditions to identify facts and circumstances that may indicate its receivables are at risk of collection.

The Company provides reserves against accounts receivable for estimated credit losses, if any, that may result from a customer’s inability to pay based on the composition of its accounts receivable, current economic conditions and historical credit loss activity.

Amounts deemed uncollectible are charged or written-off against the reserve.

As of December 31, 2021 and 2020, the Company had no allowance for credit losses.

During the years ended December 31, 2021 and 2020, the Company did no t record any provisions for credit losses and did no t write off any accounts receivable balances.

Property and Equipment

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Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment.

Long-lived assets consist of property and equipment and right-of-use assets.

Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

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The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value.

The Company did not record any impairment losses on long-lived assets during the fiscal years ended December 31, 2020 and December 28, 2019.

The Company did no t record any impairment losses on long-lived assets during the years ended December 31, 2021 and 2020.

Software Development Costs

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Software development costs incurred subsequent to the establishment of technological feasibility, but prior to the general release of the product, are capitalized and, upon general release, are amortized based upon the pattern in which economic benefits related to such assets are realized.

Due to the short time period between achieving technological feasibility and product release and the insignificant amount of costs incurred during such periods, the Company did not capitalize any software development costs during the fiscal years ended December 31, 2020 and December 28, 2019.

Due to the short time period between achieving technological feasibility and product release and the insignificant amount of costs incurred during such periods, the Company did no t capitalize any software development costs during the years ended December 31, 2021 and 2020.

Inventory is valued at the lower of cost or net realizable value.

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Any write-down of inventory to net realizable value creates a new cost basis.

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 no t recognize any loss provision for future-period remaining purchase commitments for the fiscal year ended December 31, 2020 .

Deferred Rent

The Company’s 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 term.

Adjustments for such items, consisting primarily of payment escalations, are recorded as deferred rent and amortized over the respective lease terms.

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 statements 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.

Prior to January 1, 2021, the Company accounted for leases under ASC 840, Leases (“ASC 840”).

Effective January 1, 2021, the Company accounts for leases under ASC 842, Leases (“ASC 842”).

Therefore, as of and for the year ended December 31, 2020, the Company’s consolidated financial statements continue to be presented in accordance with ASC 840, the accounting standard originally in effect for such period.

As of and for the year ended December 31, 2021, the Company’s consolidated financial statements are presented in accordance with ASC 842.

In accordance with ASC 842, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits.

The Company determines if an arrangement is a lease or contains an embedded lease at inception.

For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its right-of-use asset and lease liability at the lease commencement date and thereafter if modified.

The lease term includes any renewal options that the Company is reasonably assured to exercise.

The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable;

otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term.

The Company’s policy is to not record leases with an original term of twelve months or less on its consolidated balance sheets and recognizes those lease payments in the income statement on a straight-line basis over the lease term.

The Company’s existing leases are for office, laboratory and manufacturing space.

In addition to rent, the leases may require the Company to pay additional costs, such as utilities, maintenance and other operating costs, which are generally referred to as non-lease components.

The Company has elected to not separate lease and non-lease components.

Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of a right-of-use asset and lease liability.

Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expense in the consolidated statements of operations.

Revenue from leasing arrangements is not subject to the revenue standard for contracts with customers and remains separately accounted for under ASC 842.

In accordance with ASC 842, lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if the lease would have been classified as a sales-type lease or a direct financing lease and the lessor would have otherwise recognized a day-one loss.

The Company’s OCS Console implied rental agreements qualify as sales-type leases with

certain variable payments that meet specified criteria such that a day-one l oss would be recognized under ASC 842.

Therefore, in accordance with ASC 842, such leases are accounted for as operating leases and the Company does not derecognize the leased asset (the OCS Console) at the time of the sale but depreciates the leased asset over the useful life of the asset .

Fair Value Measurements

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Marketable Securities

The Company’s marketable securities (non-equity instruments) are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity (deficit).

Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other income (expense), net in the consolidated statements of operations.

The Company evaluates its marketable securities with unrealized losses for other-than-temporary impairment.

When assessing marketable securities for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general.

If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge recorded in the consolidated statements of operations.

No such adjustments were necessary during the periods presented.

Realized gains and losses are based on the specific identification method and are included as a component of other income (expense), net in the consolidated statements of operations.

When the fair value is below the amortized cost of a marketable security, an estimate of expected credit losses is made.

The credit-related impairment amount is recognized in the consolidated statements of operations.

Credit losses are recognized through the use of an allowance for credit losses account in the consolidated balance sheet and subsequent improvements in expected credit losses are recognized as a reversal of an amount in the allowance account.

If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis, then the allowance for the credit loss is written-off and the excess of the amortized cost basis of the asset over its fair value is recorded in the consolidated statements of operations.

There were no credit losses recorded during the years ended December 31, 2021 and 2020.

Segment Information

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The Company provides a one-year warranty on its OCS Consoles and disposable sets and replaces or repairs any OCS Console or disposable set that does not function in accordance with the product specifications .

OCS Consoles returned to the Company may be refurbished and redeployed.

OCS Consoles returned to the

Company may be refurbished and redeployed.

Estimated warranty costs are recorded at the time of shipment of the OCS Console or disposable set.

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The Company evaluates its warranty accrual at the end of each reporting period and makes adjustments as necessary.

As of December 31, 2020 and December 28, 2019, the warranty accrual was less than $0.1 million.

As of December 31, 202 1 and 2020 , the warranty accrual was less than $ 0.1 million.

Revenue Recognition

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(1) identification of the contract, or contracts, with a customer, (2) identification of the performance obligations in the contract, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations in the contract, and (5) recognition of revenue when, or as, performance obligations are satisfied.

Because all performance obligations of a customer order are delivered and recognized as revenue at the same time and because revenue allocated to performance obligations other than OCS disposable sets, such as implied rental income and service revenue, is insignificant, all components of revenue from customer arrangements are classified as a single category of revenue in the Company’s consolidated statements of operations.

Substantially all of the Company’s customer contracts have multiple-performance obligations that contain deliverables consisting of OCS Perfusion Sets and OCS Solutions.

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The Company evaluates each promise within a multiple-performance obligation arrangement to determine whether it represents a distinct performance obligation.

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 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.

The primary performance obligations in the Company’s customer arrangements from which it derives revenue are the OCS Perfusion Sets, the OCS Solutions and the OCS Console.

Revenue for each OCS Perfusion Set and OCS Solutions is recognized at the point in time at which control is transferred to the customer, which is when title transfers to the customer, typically upon arrival at the customer site.

When a customer order includes an OCS Console, 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 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.

Some of the Company’s revenue has been generated from products sold in conjunction with the clinical trials conducted for the Company’s OCS products, under arrangements referred to as customer clinical trial agreements.

Under most of these customer clinical trial agreements, the Company places an organ-specific OCS Console at the customer site for its use free of charge for the duration of the clinical trial, and the customer separately purchases from the Company the OCS disposable sets used in each transplant procedure during the clinical trial.

The Company recognizes revenue from the single, combined performance obligation only once the OCS Console has arrived at the customer site and the training and equipment set-up have been completed by the Company.

Customer orders may include the loan of an OCS Console as well as OCS disposable sets.

When the Company loans the OCS Console to the customer, it retains title to the console at all times and does not require minimum purchase commitments from the customer related to any OCS products.

In such cases, the Company invoices the customer for OCS disposable sets based on customer orders received for each new transplant procedure and the prices set forth in the customer agreement.

Over time, the Company typically recovers the cost of the loaned OCS Console through the customer’s continued purchasing and use of additional OCS disposable sets.

In such cases, the Company invoices the customer for OCS disposable sets based on customer orders received and the prices set forth in the customer agreement.

Over time, the Company typically recovers the cost of the loaned OCS Console through the customer’s continued purchasing of OCS disposable sets.

For these reasons, the Company has determined that part of the arrangement consideration for the disposable set is an implied rental payment for use of the OCS Console.

When the Company’s customer arrangements have multiple-performance obligations that contain a loan of an OCS Console for the customer’s use at its customer site as well as OCS disposable sets that are delivered simultaneously, the Company allocates the arrangement consideration between the lease deliverables (i.e., the OCS Console) and non-lease deliverables (i.e., the OCS disposable sets) based on the relative estimated standalone selling price (“SSP”) of each distinct performance obligation.

Therefore, the Company allocates the arrangement consideration between the lease deliverables (i.e., the OCS Console) and non-lease deliverables (i.e., the OCS disposable sets) based on the relative estimated standalone selling price of each distinct performance obligation.

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:

(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.

Performance Obligations

The primary performance obligations in the Company’s customer arrangements from which it derives revenue are as follows:

OCS Console — The OCS Console is a medical device that houses and controls the function of the OCS.

The performance obligation of the OCS Console includes customer training and equipment set-up.

Revenue for each OCS Console is recognized at the point in time at which control is transferred to the customer, which is typically only after the console has arrived at the customer site and the training and equipment set-up have been completed by the Company because the customer cannot benefit from the OCS Console without the training and equipment set-up having been completed.

At that time, the Company believes that the customer has the significant risks and rewards of ownership.

OCS Perfusion Set — The OCS Perfusion Set is a single-use disposable set that stores the organ and circulates blood.

Revenue for each OCS Perfusion Set is recognized at the point in time at which control is transferred to the customer, which is when title transfers to the customer in connection with delivery.

In most of the Company’s customer arrangements, title to the OCS Perfusion Set transfers when the OCS Perfusion Set arrives at the customer site.

In limited instances, title transfers upon shipment to the customer by the Company.

OCS Solutions — The OCS Solutions are a set of nutrient-enriched solutions to optimize the organ’s condition outside the human body.

Revenue for each OCS Solution is recognized at the point in time at which control is transferred to the customer, which is when title transfers to the customer in connection with delivery.

In most of the Company’s customer arrangements, title to the OCS Solutions transfers when the OCS Solutions arrive at the customer site.

In limited instances, title transfers upon shipment to the customer by the Company.

Payments Made to Customers

Under the Company’s customer arrangements that include a customer clinical trial agreement, the Company receives payments from sales to the customer of its OCS products and also makes payments to that customer for reimbursements of clinical trial costs, materials, and for specified clinical documentation related to the customer’s use of its OCS products.

Under the Company’s customer arrangements that include a customer clinical trial agreement, the Company makes payments to that customer for reimbursements of clinical trial costs, materials, and for specified clinical documentation related to the customer’s use of its OCS products.

The Company also makes payments to customers involved in post-approval studies for information related to the transplant procedures performed.

The Company determines the appropriate accounting treatments for these payments depending on the nature of the payment and whether they are for distinct goods or services.

The Company has determined that the payments made to the customer for reimbursement of clinical trial materials and customer’s costs incurred to execute specific clinical trial protocols related to the Company’s OCS products do not provide the Company with a distinct good or service transferred by the customer, and therefore such payments are recorded as a reduction of revenue from the customer in the Company’s consolidated statements of operations.

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 $ 2.7 million and $ 2.2 million for the fiscal years ended December 31, 2020 and December 28, 2019 , 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 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

Revenue is reported net of any taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction (e.g., sales, use, and value added taxes).

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 and is insignificant.

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

The Company records shipping costs billed to customers as revenue and records the associated costs incurred by the Company for those items as cost of revenue.

Contract Assets and Liabilities

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Such receivables are not contract assets.

Payment terms for customer orders, including for each of the Company’s primary performance obligations, are typically 30 days for customers in the United States and 30 to 90 days for customers in non-U.S.

markets, and such payments do not include payments that are variable, dependent on specified factors or events.

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 December 31, 2020 and December 28, 2019 .

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

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As of December 31, 2021 , the Company’s wholly- or partially unsatisfied performance obligations totaled $ 1.4 million and are expected to be completed within the next year.

Disaggregated Revenue

In determining total net revenue under the revenue recognition guidance applicable to both periods presented, the Company reduces revenue by the amount of certain payments made to customers (see “Payments Made to Customers” above).

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

Clinical trial payments reducing revenue

Total net revenue

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:

OCS Lung net revenue

OCS Heart net revenue

OCS Liver net revenue

Total net revenue

Fiscal Year Ended

Net revenue by country (1):

United States

All other countries

Total net revenue

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

Other Revenue Considerations

Revenue is reported net of taxes.

The Company does not consider shipping to be a contract performance obligation, therefore shipping costs incurred and billed to customers are recorded as revenue and cost of revenue.

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.

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Whether the Company transacts business with and receives the order from a distributor or directly from an end customer, its revenue recognition policy and resulting pattern of revenue recognition for the order are the same.

In its business with distributors, the Company enters into a distributor agreement under which the distributor places orders to the Company for its products in connection with the distributor’s own sales to identified end customers, and the Company confirms the identification of the end customer prior to accepting each order.

The Company’s distributors do not stock OCS Consoles purchased from the Company and stock only minimal quantities of OCS disposable sets.

Under these contractual arrangements, the Company invoices the distributor for the selling price (which reflects a distributor discount relative to typical end customer pricing) and payment to the Company from the distributor is not contingent upon the distributor’s collection from the end customer.

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 Console 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 Company.

Research, Development and Clinical Trials Costs

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dollars using average exchange rates in effect during each period.

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

The effects of these foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ equity.

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.

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.

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 $ 1.0 million for the years ended December 31, 2021 and 2020, respectively.

Stock-Based Compensation

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Comprehensive Loss and Accumulated Other Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders.

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders.

The Company’s only elements of other comprehensive loss are foreign currency translation adjustments and unrealized gains (losses) on marketable securities.

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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.

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 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 fiscal years ended December 31, 2020 and December 28, 2019.

The Company reported a net loss attributable to common stockholders for each of the years ended December 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 December 31,

Warrants to purchase common stock

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Changes in deferred tax assets and liabilities are recorded in the provision for income taxes.

The Company assesses the likelihood that its deferred tax assets will be and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense.

The Company assesses the likelihood that its deferred tax assets will be realized and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense.

Potential for recovery of deferred tax assets is evaluated by analyzing carryback capacity in periods with taxable income, reversal of existing taxable temporary differences and estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

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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 Issued Accounting Pronouncements

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e., lessees and lessors).

The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

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.

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.

In July 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842) , which added an optional transition method under which financial statements may be prepared under the revised guidance for the year of adoption, but not for prior years.

Under the latter method, entities will recognize a cumulative catch-up adjustment to the opening balance of retained earnings in the period of adoption.

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.

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.

Recently Adopted Accounting Pronouncements

The Company adopted ASU No.

2016-02, Leases (Topic 842), inclusive of ASU 2021-05 Leases (Topic 842):

Lessors – Certain Leases with Variable Lease Payments, effective January 1, 2021 , using the modified retrospective method under ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements.

Since the Company ceased to be an emerging growth company as of December 31, 2021, the Company adopted the standard during the fourth quarter of 2021 effective as of January 1, 2021.

The modified retrospective transition method allows entities to apply the transition requirements at the effective date rather than at the beginning of the earliest comparative period presented.

The Company’s reporting for comparative periods was not recast and is presented in accordance with ASC 840.

Adoption of the new standard resulted in the recording of right-of-use assets and lease liabilities of $ 6.7 million and $ 8.4 million, respectively.

The adoption of the standard did not have a material impact on the Company’s results of operations or cash flows.

The Company elected to use the transition package of three practical expedients, which among other things, allowed the Company to carry forward the historical lease classification.

The Company has also elected to use its incremental borrowing rate on the date of adoption using the remaining lease term as of the date of adoption.

The underlying assets of the Company’s leases as of the adoption date consisted of office, laboratory and manufacturing space.

The Company assessed the implied rentals of OCS consoles loaned to customers at no charge.

The Company’s implied rentals of OCS consoles meet such criteria to continue to account for the lease as an operating lease as the lease would have been classified as a sales-type lease and a day-one loss would have otherwise been recognized.

Therefore, the adoption of the standard had no impact on the consolidated financial statements and related disclosures in accordance with ASU 2021-05 Leases (Topic 842):

Lessors – Certain Leases with Variable Lease Payments.

The Company adopted ASU No.

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

Measurement of Credit Losses on Financial Instruments for the year ended December 31, 2021.

The new standard adjusts the accounting for assets held at amortized costs basis, including marketable securities accounted for as available for sale, and trade receivables.

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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.

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.

Early application continues to be allowed .

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 adoption of this standard did not have a material impact on the consolidated financial statements and related disclosures.

The Company adopted ASU No.

2019-12 , Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740) for the year ended December 31, 2021.

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

The adoption of this standard did not have a material impact on the consolidated financial statements and related disclosures.

Marketable Securities

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

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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):

Fair Value of Financial Assets

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

Fair Value Measurements at December 31, 2021 Using:

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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 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):

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Finished goods

During the fiscal years ended December 31, 2020 and December 28, 2019, the Company made non-cash transfers of OCS Consoles from inventory to property and equipment (OCS Consoles loaned to customers) of $1.2 million and $2.1 million, respectively.

During the years ended December 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 $ 1.8 million and $ 1.2 million, respectively.

Property and Equipment, Net

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Accumulated depreciation and amortization

During the fiscal years ended December 31, 2020 and December 28, 2019, total depreciation and amortization expense was $1.6 million and $1.2 million, respectively.

During the years ended December 31, 2021 and 2020, total depreciation and amortization expense was $ 1.8 million and $ 1.6 million, respectively.

Of those amounts, $ 1.4 million and $ 1.3 million, respectively, was recorded as expense in cost of revenue related to the depreciation of OCS Consoles loaned to customers.

The Company retains title to OCS Consoles loaned to customers.

Construction-in-progress recorded as of December 31, 2020 and December 28, 2019 was primarily related to the in-process construction of manufacturing equipment.

Construction-in-progress recorded as of December 31, 2021 and 2020 was primarily related to leasehold improvements and in-process construction of manufacturing equipment, respectively.

Accrued Expenses and Other Current Liabilities

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

Accrued research, development and clinical trial expenses

Accrued research, development and clinical trial

Accrued payroll and related expenses

Accrued financing fees

Accrued professional fees

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Long-Term Debt

As of December 31, 2020 and December 28, 2019, long-term debt consisted of the following (in thousands):

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.

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

Principal amount of long-term debt

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Long-term debt, net of discount and current portion

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.

The Credit Agreement provides for aggregate maximum borrowings of up to $65.0 million, consisting of (i) $35.0 million upon entering into the Credit Agreement, which was borrowed by the Company in June 2018, and (ii) potential additional borrowings of up to $30.0 million that could have become available upon the Company’s achievement of specified revenue thresholds and a regulatory milestone by determinable dates.

The Company did not achieve these revenue thresholds and regulatory milestones by such dates, and therefore OrbiMed’s commitment to fund any additional borrowing was terminated.

Borrowings under the Credit Agreement bear interest at an annual rate equal to the London Interbank Offered Rate (“LIBOR”), subject to a minimum of 1.0 % and a maximum of 4.0 % , plus 8.5 % (the “Applicable Margin”), subject in the aggregate to a maximum interest rate of 11.5 %.

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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 that decreases annually.

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

At its option, the Company may prepay outstanding borrowings under the Credit Agreement.

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 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.

The debt discount is reflected as a reduction of the carrying value of long-term debt on the Company’s consolidated balance sheet and is being accreted to interest expense over the term of the Credit Agreement using the effective interest method.

All obligations under the Credit Agreement are guaranteed by the Company and each of its material subsidiaries.

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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.

The Company assessed all terms and features of the Credit Agreement in order to identify any potential embedded features that would require bifurcation.

As part of this analysis, the Company assessed the economic characteristics and risks of the debt.

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 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.

As of December 31, 2021 and 2020, the interest rate applicable to borrowings under the Credit Agreement was 9.5 %.

During each of the years ended December 31, 2021 and 2020, the weighted average effective interest rate on outstanding borrowings under the Credit Agreement was approximately 11.2 %.

Paycheck Protection Program Loan

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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

TransMedics, Inc.

issued Series A-1 convertible preferred stock (the “Series A-1 Preferred Stock”), Series B convertible preferred stock (the “Series B Preferred Stock”), Series B-1 convertible preferred stock (the “Series B-1 Preferred Stock”), Series C convertible preferred stock (the “Series C Preferred Stock”), Series D convertible preferred stock (the “Series D Preferred Stock”), Series E convertible preferred stock (the “Series E Preferred Stock”) and Series F convertible preferred stock (the “Series F Preferred Stock”).

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”.

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.

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 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.

Preferred Stock

As of December 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.

The preferred stock will have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s boards of directors upon issuance.

The shares of preferred stock currently undesignated.

As of December 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 stockholders.

The holders of common stock, voting exclusively and as a separate class, are entitled to elect two directors of the Company.

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

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

As of December 31, 2021, the Company had 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 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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As of December 31, 202 1 , 1,583,925 shares of common stock were available for issuance under the 2019 Plan.

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

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.

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.

A total of 371,142 shares of common stock of TransMedics Group are reserved for issuance under the 2019 ESPP as of December 31, 2021.

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

During the year ended December 31, 2021, 27,849 shares were issued under the 2019 ESPP and as of December 31, 2021, 320,596 shares remained available for issuance.

2021 Inducement Plan

In August 2021, the Company’s board of directors approved the TransMedics Group, Inc.

Inducement Plan (the “Inducement Plan”).

Pursuant to the terms of the Inducement Plan, the Company may grant nonstatutory stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock unit awards and performance awards to individuals who were not previously employees or directors of the Company or individuals returning to employment after a bona fide period of non-employment with the Company.

A total of 1,000,000 shares of the Company’s common stock were initially available for issuance under the Inducement Plan.

As of December 31, 2021, 738,700 shares of common stock were available for issuance under the Inducement Plan.

Stock Option Valuation

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The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees and directors:

Fiscal Year Ended

Year Ended December 31,

Risk-free interest rate

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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 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.

The Company has not granted to employees any stock-based awards with performance-based vesting conditions.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021 and 2020, was $ 16.3 million and $ 2.9 million, respectively.

The weighted average grant-date fair value of stock options granted during the years ended December 31, 2021 and 2020 was $ 18.63 per share and $ 7.91 per share, respectively.

The Company has no t granted to employees any stock-based awards with performance-based vesting conditions.

Stock-Based Compensation

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

Fiscal Year Ended

Year Ended December 31,

Cost of revenue

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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.

During the years ended December 31, 2021 and 2020, 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 years ended December 31, 2021 and 2020 and, accordingly, recorded a foreign income tax provision of less than $ 0.1 million for each of the years ended December 31, 2021 and 2020, respectively.

Income Before Taxes

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

Fiscal Year Ended

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

Year Ended December 31,

United States

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federal statutory income tax rate to the Company’s effective income tax rate is as follows:

Fiscal Year Ended

Year Ended December 31,

Federal statutory income tax rate

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Deferred rent

Lease liability

Total deferred tax assets

Deferred tax liabilities:

Right-of-use assets

Unrealized gain (loss)

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federal and state net operating loss carryforwards of $ 368.1 million and $ 304.0 million, respectively, which may be available to offset future taxable income and begin to expire in 2022 and 2030 , respectively.

The Company’s federal net operating losses include $108.0 million, which can be carried forward indefinitely.

The Company’s federal net operating loss carryforwards include $ 156.4 million that can be carried forward indefinitely.

As of December 31, 2021, the Company also had U.S.

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The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study.

If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

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During 2021, the Company recorded a net increase to its valuation allowance in the amount of $ 15.1 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 had no unrecognized tax benefits or related interest and penalties accrued for the years ended December 31, 2021 and 2020.

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

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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

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2021 and 2020 related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards in 2021 and 2020, and were as follows (in thousands):

Year Ended December 31,

Valuation allowance as of beginning of year

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Valuation allowance as of end of year

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.

Commitments and Contingencies

Operating Leases

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

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.

As of December 31, 2021 and 2020, 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 leases its office, laboratory and manufacturing space under two noncancelable leases (the “Leases”) that expire in December 2027 and include a lease incentive, fixed payment escalations, and rent holidays.

The Leases include an option to renew for an additional five years .

The option to extend the lease term was not included in the right-of-use asset and the lease liability as it was not reasonably certain of being exercised.

The Company classified the Leases as operating leases under ASC 842.

Annual base rent increases at an average rate 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):

December 31, 2021

December 31, 2022

As these costs are generally variable in nature, they are not included in the measurement of the right-of-use asset and related lease liability.

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

The Company determined that it owns the leasehold improvements related to the Leases and, as such, reflected the $ 3.4 million

lease incentive as a reduction of rental payments used to measure the operating lease liability, and, in turn, the operating lease right-of-use asset upon adoption of ASC 842.

The components of the Company’s lease expense under ASC 842 are as follows:

December 31, 2021

Operating lease cost

Short-term lease cost

Variable lease cost

Supplemental disclosure of cash flow information related to the leases were as follows (in thousands):

December 31, 2021

Cash paid for amounts included in the measurement of operating lease liabilities

Operating lease liabilities arising from obtaining right-of-use assets and

leasehold improvements

The weighted-average remaining lease term as of December 31, 2021 was 6.0 years.

The weighted-average discount rate as of December 31, 2021 was 6.7 %.

Because the interest rate implicit in the lease was not readily determinable, the Company’s estimated incremental borrowing rate was used to calculate the present value of the Leases.

In determining its incremental borrowing rate, the Company considered its credit quality and assessed interest rates available in the market for similar borrowings, adjusted for the impact of collateral over the term of the lease.

Future annual lease payments under the Company’s Leases as of December 31, 2021 are as follows (in thousands):

Year Ending December 31,

Total future minimum lease payments

imputed interest

estimated lease incentives

Total operating lease liabilities

The following table represents lease liabilities on the consolidated balance sheet (in thousands):

December 31, 2021

Current operating lease liabilities

Operating lease liabilities, net of current portion

Total operating lease liabilities

Under prior lease guidance, minimum lease payments under operating leases were as follows as December 31, 2020 (in thousands):

Year Ending December 31,

Commitments and Contingencies

License Agreement with the Department of Veterans Affairs

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

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 Company was granted an interim patent term extension for this patent until November 6, 2021.

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

The maximum extension granted would be through May 2022;

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

The Company has not yet received communication from the USPTO, but expects that the USPTO’s determination of patent term extension for the ’082 patent will maintain the November 6, 2021 expiration date.

The final determination of the length of the patent extension is not expected to have a material impact on the Company’s financial results.

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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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 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 Company paid the VA royalties of $ 0.4 million and $ 0.3 million during of the years ended December 31, 2021 and 2020, respectively.

The Company also accrued VA royalties of $ 0.2 million and $ 0.1 million as of December 31, 2021 and 2020, respectively.

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.

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

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

For the years ended December 31, 2021 and 2020, the Company had no t 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 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 31, 2020 and December 28, 2019.

Unconditional Purchase Commitment

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The contract is not cancellable without penalty.

The remaining purchase commitment as of December 31, 2021 was $ 8.0 million.

Legal Proceedings

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The Company has determined that it operates in one segment (see Note 2).

Net revenue by OCS product is summarized as follows (in thousands):

Fiscal Year Ended

Net revenue by OCS product:

OCS Lung net revenue

OCS Heart net revenue

OCS Liver net revenue

Total net revenue

Financial data by geographical area is summarized as follows (in thousands):

Fiscal Year Ended

Year Ended December 31,

Net revenue by country:

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Total long-lived assets

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

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

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

Year Ended December 31,

Gross revenue from sales to customers

Clinical trial payments reducing revenue

Total net revenue

The Company 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) 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 to the customer represents the fair value of the distinct good or service received.

As a result, such payments made to the customers 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 $ 2.1 million and $ 1.6 million for the years ended December 31, 2021 and 2020, respectively, as operating expenses.

Disaggregated Revenue

Year Ended December 31,

Net revenue by OCS product:

OCS Lung net revenue

OCS Heart net revenue

OCS Liver net revenue

Total net revenue

Year Ended December 31,

Net revenue by country (1):

United States

All other countries

Total net revenue

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

Related Party Transactions

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The Company paid Dr.

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.

Selected Quarterly Results of Operations Data (Unaudited)

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.

The Company’s operating results may fluctuate due to a variety of factors.

Because the timing of organ transplant procedures is generally unpredictable, the Company has not experienced seasonality in its business from quarter to quarter and does not expect to do so in the foreseeable future.

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

Loss from operations

Net loss per share (basic and diluted)

Amira Hassanein $ 0.4 million and $ 0.3 million in total compensation in the years ended December 31, 2021 and 2020, respectively, for her services as an employee.

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