What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-09 · 101 added, 318 removed, 340 unchanged (55% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

September 30,

Current assets:

6 unchanged sentences

Restricted cash

Other long-term assets

Operating lease right-of-use assets

Liabilities and Stockholders' Equity

3 unchanged sentences

Deferred revenue

Current portion of deferred rent

Operating lease liabilities

Total current liabilities

Long-term debt, net of discount and current portion

Deferred rent, net of current portion

Operating lease liabilities, net of current portion

Total liabilities

6 unchanged sentences

150,000,000 shares authorized;

shares and 27,175,305 shares issued and outstanding at September 30, 2021

shares and 27,791,615 shares issued and outstanding at March 31, 2022

and December 31, 2021, respectively

7 unchanged sentences

(In thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of revenue

6 unchanged sentences

Interest expense

Other income (expense), net

Other expense, net

Total other expense, net

9 unchanged sentences

(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Other comprehensive income (loss):

Foreign currency translation adjustment

Unrealized losses on marketable securities,

Unrealized gains (losses) on marketable securities,

net of tax of $ 0

14 unchanged sentences

Foreign currency translation

Unrealized gains on marketable

Balances at March 31, 2021

Issuance of common stock upon the

exercise of common stock options

Stock-based compensation expense

Foreign currency translation

Unrealized losses on marketable

Balances at June 30, 2021

Balances at March 31, 2022

Stockholders'

Balances at December 31, 2020

Issuance of common stock upon the

5 unchanged sentences

Foreign currency translation

Balances at September 30, 2021

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

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

Stockholders'

Balances at December 28, 2019

Issuance of common stock upon the

exercise of common stock options

Issuance of common stock in connection

with employee stock purchase plan

Stock-based compensation expense

Foreign currency translation

Unrealized gains on marketable

Balances at March 31, 2021

Issuance of common stock

upon the exercise of

common stock options

Issuance of common stock

in public offering, net of

discounts and issuance

costs of $ 628

Stock-based compensation

Foreign currency

translation adjustment

Unrealized losses on

marketable securities

Balances at June 30, 2020

Issuance of common stock

upon the exercise of

common stock options

Issuance of common stock in

connection with employee

stock purchase plan

Reversal of estimated

offering costs

Stock-based compensation

Foreign currency

translation adjustment

Unrealized losses on

marketable securities

Balances at September 30, 2020

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

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Non-cash interest expense and end of term accretion expense

Non-cash lease expense

Net amortization of premiums on marketable securities

Unrealized foreign currency transaction (gains) losses

Unrealized foreign currency transaction losses

Changes in operating assets and liabilities:

4 unchanged sentences

Deferred revenue

Operating lease liabilities

Deferred rent

4 unchanged sentences

Proceeds from sales and maturities of marketable securities

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

Payments of public offering costs and other financing costs

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

underwriting discounts and commissions

Proceeds from issuance of common stock upon exercise of stock options

1 unchanged sentence

purchase plan

Proceeds from Paycheck Protection Program loan

Repayment of Paycheck Protection Program loan

Net cash provided by financing activities

23 unchanged sentences

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 $ 31.5 million for the nine months ended September 30, 2021 and $ 28.7 million for the year ended December 31, 2020.

As of September 30, 2021, the Company had an accumulated deficit of $ 429.8 million.

The Company has incurred recurring losses since inception, including net losses of $ 10.6 million for the three months ended March 31, 2022 and $ 44.2 million for the year ended December 31, 2021.

As of March 31, 2022, the Company had an accumulated deficit of $ 453.0 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 $ 102.9 million as of September 30, 2021 will be sufficient to fund its operations, capital expenditures, and debt service payments for at least the next 12 months following the filing of this Quarterly Report on Form 10-Q.

The Company believes that its existing cash, cash equivalents, and marketable securities of $ 72.0 million as of March 31, 2022 will be sufficient to fund its operations, capital expenditures, and debt service payments for at least the next 12 months following the filing of this Quarterly Report on Form 10-Q.

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

8 unchanged sentences

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 include:

the temporary disruption of transplant procedures at many of the organ transplant centers that purchase OCS products;

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 its product sales;

2 unchanged sentences

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 addition, the Company’s sales and clinical adoption team was restricted in visiting many transplant centers in person between April 2020 and September 2020.

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.

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

After seeing recovery in transplant volumes in the second quarter of 2021, the Delta variant of the virus that causes COVID-19 has had a negative impact on overall transplant volumes in the third quarter of 2021 as compared to the previous quarter , with l ung transplants impacted more heavily than heart and liver transplants.

Therefore, we expect the negative impact on OCS product sales due to the COVID-19 pandemic to continue through 2021 and into 2022 .

The extent of the future impact on the Company’s operations and financial condition will depend on the length and severity of the pandemic, its consequences, the effects of any variants as new strains evolve and containment and vaccination efforts.

While vaccination efforts are ongoing in the United States, it is not yet fully known how the availability and administration of vaccines will impact the ongoing COVID-19 pandemic, including with respect to vaccination rates, the duration o f the efficacy of the vaccines and their effectiveness against the Delta variant or any other variants as new strains of the virus evolve .

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, 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”).

7 unchanged sentences

These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of September 30, 2021 and results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020 have been made.

The Company’s results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2022 and results of operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021 have been made.

The Company’s results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

Use of Estimates

10 unchanged sentences

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

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

The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

As of March 31, 2022 and December 31, 2021, the Company had no allowance for credit losses.

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

For the three months ended September 30, 2021, two customers accounted for 16 % and 12 % of net revenue, respectively.

For the nine months ended September 30, 2021, one customer accounted for 10 % of net revenue.

For the three months ended September 30, 2020, two

customer s accounted for 12 % and 14 % of net revenue , respectively .

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

As of September 30, 2021 , two customer s accounted for 20 % and 11 % of accounts receivable , respectively .

As of December 31 , 20 20 , one customer accounted for 30 % of accounts receivable.

For the three months ended March 31, 2022, three customers accounted for 16 %, 15 % and 12 % of net revenue, respectively.

For the three months ended March 3 1 , 202 1 , two customer s each accounted for 12 % of net revenue.

As of March 31, 2022 , four customer s accounted for 14 % , 12 %, 12 % and 10 % of accounts receivable , respectively .

As of December 31 , 20 2 1 , two customer s accounted for 21 % and 15 % of accounts receivable , respectively .

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.

11 unchanged sentences

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

Marketable Securities

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.

Segment Information

4 unchanged sentences

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

Revenue Recognition

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 OCS products.

To a lesser extent, the Company also generates revenue from the sale of OCS Consoles to customers and from the implied rental of OCS Consoles loaned to customers at no charge.

For each new transplant procedure, customers purchase an additional OCS disposable set for use on the customer’s existing organ-specific OCS Console.

The Company recognizes revenue from sales to customers applying the following five steps:

(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.

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

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.

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.

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.

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.

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

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

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

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.

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.

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 reimbursable clinical costs as a reduction of revenue of less than $ 0.1 million and $ 1.1 million for the three and nine months ended September 30, 2021, respectively, and $ 0.9 million and $ 2.1 million for the three and nine months ended September 30, 2020, respectively, as presented below in disaggregated revenue.

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

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

The Company recorded payments made to customers related to post-approval studies and for documentation related to existing standard-of-care protocols of $ 0.4 million and $ 1.6 million for the three and nine months ended September 30, 2021, respectively, and $ 0.3 million and $ 1.1 million for the three and nine months ended September 30, 2020, 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 was insignificant during each of the three and nine months ended September 30, 2021 and 2020.

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

The Company recognizes a receivable at the point in time at which it has an unconditional right to payment.

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 September 30, 2021 and December 31, 2020.

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

The Company has determined that its only contract liabilities are deferred revenue, which consists of amounts that have been invoiced but that have not been recognized as revenue.

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

As of September 30, 2021, the Company’s wholly- or partially-unsatisfied performance obligations totaled $ 0.8 million and are expected to be completed within the next year.

Disaggregated Revenue

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):

Three Months Ended September 30,

Nine Months Ended September 30,

Gross revenue from sales to customers

clinical trial payments reducing

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):

Three Months Ended September 30,

Nine Months Ended September 30,

Net revenue by OCS product:

OCS Lung net revenue

OCS Heart net revenue

OCS Liver net revenue

Total net revenue

Three Months Ended September 30,

Nine Months Ended September 30,

Net revenue by country(1):

United States

United Kingdom

All other countries

Total net revenue

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

Other Revenue Considerations

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

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

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

A small portion of the Company’s revenue is generated by sales to a limited number of distributors in Europe and Asia-Pacific.

When the Company transacts with a distributor, its contractual arrangement is with the distributor and not with the end customer.

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.

Stock-Based Compensation

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

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

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

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

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

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

Net Income (Loss) per Share

2 unchanged sentences

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

The Company reported a net loss attributable to common stockholders for each of the three and nine months ended September 30, 2021 and 2020.

The Company reported a net loss attributable to common stockholders for each of the three months ended March 31, 2022 and 2021.

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 September 30,

As of March 31,

Warrants to purchase common stock

1 unchanged sentence

Employee stock purchase plan

Recently Issued Accounting Pronouncements

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and 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.

Since the Company’s common stock held by non-affiliates exceeded $ 700.0 million as of June 30, 2021, the Company will become a “large accelerated filer” and as such cease to qualify as an emerging growth company from January 1, 2022.

As a result, the Company will be subject to certain requirements that apply to other public companies but did not previously apply to the Company due to its status as an emerging growth company, including the provisions of Section 404 of the Sarbanes-Oxley Act, which requires that the Company’s independent registered public accounting firm provide an attestation report on the effectiveness of the Company’s internal control over financial reporting in the Company’s Annual Report on Form 10-K for the year ending December 31, 2021.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (“ASU 2016-02”), and has since issued several additional amendments thereto, collectively referred to herein as ASC 842.

ASC 842 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 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 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 years beginning after December 15, 2022.

In July 2021, FASB issued ASU 2021-05 Lessors – Certain Leases with Variable Lease Payments (“ASU 2021-05”), which amended ASU 2016-02 to allow for sales-type or direct financing leases with certain variable payments that meet certain criteria to continue to be accounted for as operating leases as such leases had been treated under ASC 840.

For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2021, and interim periods within those annual reporting periods.

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

Early adoption is permitted for all entities.

For companies who have not yet adopted ASC 842, ASU 2021-05 may be adopted at the same time and in the same manner as ASU 2016-02.

Since the Company will cease to be an emerging growth company as of December 31, 2021, the Company is required to adopt ASC 842 during the fourth quarter of 2021 effective as of January 1, 2021.

The Company plans to adopt ASC 842 using the modified retrospective approach transition method as of the date of adoption such that prior periods will not be restated.

The Company expects that the adoption will result in the recognition of material right-of-use assets and lease liabilities on its consolidated balance sheet .

In June 2016, the FASB issued ASU No.

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

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.

The standard eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses.

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 years.

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

Early adoption is permitted for all entities.

In November 2019, the FASB issued ASU No.

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

Early application continues to be allowed.

Since the Company will cease to be an emerging growth company as of December 31, 2021, the Company is required to adopt the standard during the fourth quarter of 2021 effective as of January 1, 2021.

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

In December 2019, the FASB issued ASU No.

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

The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general

principles as well as clarifying and amending existing guidance to improve consistent application.

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

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

Since the Company will cease to be an emerging growth company as of December 31, 2021, the Company is required to adopt the standard during the fourth quarter of 2021 effective as of January 1, 2021 .

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

Marketable Securities

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

September 30, 2021

March 31, 2022

Treasury securities (due within one year)

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

Fair Value Measurements at September 30, 2021 Using:

Fair Value Measurements at March 31, 2022 Using:

Cash equivalents:

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

During the three and nine months ended September 30, 2021 and 2020, there were no transfers between Level 1, Level 2, and Level 3.

Inventory consisted of the following (in thousands):

September 30, 2021

March 31, 2022

December 31, 2021

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Finished goods

During the nine months ended September 30, 2021 and 2020, the Company made non-cash transfers of OCS Consoles from inventory to property and equipment (OCS Consoles loaned to customers) of $ 0.9 million and $ 0.7 million, respectively.

During the three months ended March 31, 2022 and 2021, the Company made non-cash transfers of OCS Consoles from inventory to property and equipment (OCS Consoles loaned to customers) of $ 1.0 million and $ 0.4 million, respectively.

Accrued Expenses and Other Current Liabilities

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

September 30, 2021

March 31, 2022

December 31, 2021

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

September 30, 2021

March 31, 2022

December 31, 2021

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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 decreased to zero in June 2021.

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

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

The Company is 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.

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and engaging in certain other business transactions.

As of September 30, 2021, the Company was in compliance with the financial covenants under the Credit Agreement.

As of March 31, 2022, the Company was in compliance with the financial covenants under the Credit Agreement.

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

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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.

As of September 30, 2021, the interest rate applicable to borrowings under the Credit Agreement was 9.5 %.

During the nine months ended September 30, 2021, the weighted average effective interest rate on outstanding borrowings under the Credit Agreement was approximately 11.2 %.

Preferred Stock

As of September 30, 2021, the Company’s articles of organization authorized the Company to issue up to 25,000,000 shares of preferred stock, no par value per share, all of which is undesignated .

As of September 30, 2021, the Company’s articles of organization authorized the Company to issue up to 150,000,000 shares of common stock, no par value per share.

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

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

Through September 30, 2021, no dividends had been declared or paid.

As of September 30, 2021, the Company has outstanding warrants to purchase 50,000 shares of common stock at an exercise price of $ 8.75 per share with an expiration date of November 7, 2022 and warrants to purchase 14,440 shares of common stock at an exercise price of $ 17.47 per share with an expiration date of May 6, 2024 .

As of March 31, 2022, the interest rate applicable to borrowings under the Credit Agreement was 9.5 %.

During the three months ended March 31, 2022, the weighted average effective interest rate on outstanding borrowings under the Credit Agreement was approximately 11.2 %.

Stock-Based Compensation

2019 Stock Incentive Plan and Option Grants

2019 Stock Incentive Plan

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

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

As of September 30, 2021, 1,550,057 shares of common stock were available for issuance under the 2019 Plan.

During the nine months ended September 30, 2021, the Company granted options to its employees and directors with service-based vesting for the purchase of an aggregate of 925,675 shares of common stock with a weighted average grant-date fair value of $ 19.58 per share.

As of March 31, 2022, 890,558 shares of common stock were available for issuance under the 2019 Plan.

2019 Employee Stock Purchase Plan

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A total of 371,142 shares of the Company’s common stock are reserved for issuance under the 2019 ESPP.

During the nine months ended September 30, 2021, 27,849 shares of common stock were issued under the 2019 ESPP and as of September 30, 2021, 320,596 shares of common stock remained available for issuance.

During the three months ended March 31, 2022, 12,465 shares of common stock were issued under the 2019 ESPP and as of March 31, 2022, 308,131 shares of common stock remained available for issuance.

2021 Inducement Plan

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

During the nine months ended September 30, 2021, the Company granted options to purchase an aggregate of 160,800 shares of common stock under the Inducement Plan to new employees, with a weighted average grant-date fair value of $ 15.18 per share.

As of September 30, 2021, 839,200 shares of common stock were available for issuance under the Inducement Plan.

As of March 31, 2022, 580,200 shares of common stock were available for issuance under the Inducement Plan.

Stock-Based Compensation

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of revenue

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Selling, general and administrative expenses

As of September 30, 2021, total unrecognized compensation cost related to unvested share-based awards was $ 21.3 million, which is expected to be recognized over a weighted average period of 2.8 years.

During the three months ended March 31, 2022, the Company granted options to its employees and directors with service-based vesting for the purchase of an aggregate of 880,910 shares of common stock with a weighted average grant-date fair value of $ 7.11 per share.

As of March 31, 2022, total unrecognized compensation cost related to unvested share-based awards was $ 24.6 million, which is expected to be recognized over a weighted average period of 3.1 years.

Commitments and Contingencies

Operating Leases

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

Annual base rent for the premises is approximately $ 1.9 million for the period commencing on December 23, 2020 and ending December 22, 2021 and will increase at an average of 2.5 % each year until the end of the term.

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

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

The Company recorded rent expense of $ 0.5 million and $ 0.4

million in the three months ended September 30, 2021 and 2020 , respectively .

The Company recorded rent expense of $ 1.4 million in each of the nine months ended September 30, 2021 and 2020 .

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

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

As of September 30, 2021 , the Company had a tenant receivable of $ 0.1 million .

Future minimum lease payments under operating leases as of September 30, 2021 are as follows (in thousands):

December 31, 2021 (remaining 3 months)

December 31, 2022

December 31, 2023

December 31, 2024

December 31, 2025

The Company leases office, laboratory and manufacturing space under two non-cancelable operating leases.

There have been no material changes to the Company’s leases during the three months ended March 31, 2022.

For additional information, please read Note 12 Leases, to the consolidated financial statements in the Company’s Form 10-K for the year ended December 31, 2021.

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 November 6, 2021.

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 granted.

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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 impact the Company’s financial results.

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

As of September 30, 2021 and December 31, 2020, the Company had no t made any contributions to the plan.

As of March 31, 2022 and December 31, 2021, the Company had no t made any contributions to the plan.

Indemnification Agreements

In the ordinary course of business, the Company has agreed to defend and indemnify its customers against third-party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks, or trade secrets.

The Company’s exposure under these indemnification provisions is generally limited to the total amount paid by the end-customer under

the agreement.

The Company’s exposure under these indemnification provisions is generally limited to the total amount paid

by the end-customer under the agreement.

However, certain agreements include indemnification provisions that could potentially expose the Company to losses in excess of the amount received under the agreement.

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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 September 30, 2021 and December 31, 2020.

The Company is not currently aware of any indemnification claims and had not accrued any liabilities related to such obligations in its consolidated financial statements as of March 31, 2022 and December 31, 2021.

Unconditional Purchase Commitment

1 unchanged sentence

The contract is not cancellable without penalty.

The remaining purchase commitment as of March 31, 2022 was $ 8.0 million.

Legal Proceedings

3 unchanged sentences

Segment Reporting and Geographic Data

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

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

September 30, 2021

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

See Note 11 for revenue by country.

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

March 31, 2022

December 31, 2021

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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):

Three Months Ended March 31,

Gross revenue from sales to customers

clinical trial payments reducing

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 $ 0.5 million for each of the three months ended March 31, 2022 and 2021, as operating expenses.

Disaggregated Revenue

Three Months Ended March 31,

Net revenue by OCS product:

OCS Lung net revenue

OCS Heart net revenue

OCS Liver net revenue

Total net revenue

Three Months Ended March 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.

Contract Assets and Liabilities

The Company recognizes a receivable at the point in time at which it has an unconditional right to payment.

Such receivables are not contract assets.

The Company had no contract assets as of March 31, 2022 and December 31, 2021.

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.

The Company has determined that its only contract liabilities are deferred revenue, which consists of amounts that have been invoiced but that have not been recognized as revenue.

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

As of March 31, 2022, the Company’s wholly- or partially unsatisfied performance obligations totaled $ 2.1 million and are expected to be completed within the next year.

Related Party Transactions

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The Company paid Dr.

Amira Hassanein $ 0.1 million and $ 0.3 million in total compensation for the three and nine months ended September 30, 2021, respectively, and less than $ 0.1 million and $ 0.2 million in total compensation for the three and nine months ended September 30, 2020, respectively, for her services as an employee.

Amira Hassanein approximately $ 0.1 million in total compensation for each of the three months ended March 31, 2022 and 2021 for her services as an employee.

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

What changed 10-Q

Item 1. Financial Statements