What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-05 · 168 added, 78 removed, 204 unchanged (55% of the section changed)

28 unchanged sentences

commercializing our products;

developing our National OCS Program;

developing our market and distribution chain and providing general and administrative support for these operations.

2 unchanged sentences

Our ability to generate net revenue sufficient to achieve profitability will depend on the successful further development and commercialization of our products.

We generated net revenue of $15.9 million and incurred a net loss of $10.6 million for the three months ended March 31, 2022.

We generated net revenue of $36.4 million and incurred a net loss of $22.1 million for the six months ended June 30, 2022.

We generated net revenue of $30.3 million and incurred a net loss of $44.2 million for the year ended December 31, 2021.

As of March 31, 2022, we had an accumulated deficit of $453.0 million.

As of June 30, 2022, we had an accumulated deficit of $464.5 million.

We expect to continue to incur net losses for the foreseeable future as we focus on growing commercial sales of our products in both the United States and select non-U.S.

markets, including growing our commercial team, which will pursue increasing commercial sales of our OCS products;

growing our National OCS Program;

scaling our manufacturing operations;

building our commercial operations;

developing the next generation OCS;

continuing research, development and clinical trial efforts;

seeking regulatory clearance for new products and product enhancements, including new indications, in both the

U nited States and select non-U.S.

seeking regulatory clearance for new products and product

enhancements, including new indications, in both the U nited States and select non-U.S.

and operating as a public company.

4 unchanged sentences

If we are unable to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations.

As of March 31, 2022, we had cash, cash equivalents and marketable securities of $72.0 million.

Our credit facility of $35.0 million with OrbiMed matures on June 22, 2023.

We believe that our cash, cash equivalents and marketable securities will be sufficient for us to fund our operating expenses, capital expenditure requirements and debt service payments for at least 12 months following the filing of our Quarterly Report on Form 10-Q.

As of June 30, 2022, we had cash, cash equivalents and marketable securities of $58.1 million.

On July 25, 2022, we entered into a credit agreement with Canadian Imperial Bank of Commerce, or CIBC, for a loan of $60.0 million of which we used $36.3 million to repay our outstanding debt with OrbiMed Royalty Opportunities II, LP, or OrbiMed.

We believe that our cash, cash equivalents and marketable securities, including net proceeds from the CIBC loan, will be sufficient for us to fund our operating expenses, capital expenditure requirements and debt service payments for at least 12 months following the filing of our Quarterly Report on Form 10-Q.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

See “—Liquidity and Capital Resources”.

COVID-19 and Economic Impacts

The COVID-19 pandemic, including efforts to contain the spread of the coronavirus, has impacted, and may continue to impact, our business, financial condition, operating results and cash flows, including as a result of the impact of new variants.

11 unchanged sentences

The COVID-19 pandemic has also impacted, and may continue to impact, our third party suppliers, including through the effects of facility closures, reductions in operating hours, staggered shifts and other social distancing efforts, labor shortages, decreased productivity and unavailability of materials or components.

In addition, inflation, changes in trade policies, and the imposition of duties and tariffs could adversely impact the price or availability of raw materials, the components of our products as well as shipping and transportation costs.

While we maintain an inventory of finished products and raw materials used in our OCS products, a further prolonged pandemic could lead to shortages in the raw materials necessary to manufacture our products.

1 unchanged sentence

If we experience a prolonged disruption in our manufacturing, supply chains, or commercial operations, we would expect to experience a material adverse impact on our business, financial condition, results of operations and prospects.

Recent Developments

On April 28, 2022, we received a PMA from the FDA for the use in the United States of the OCS Heart for use with organs from donors after circulatory death.

The PMA for the OCS Heart was based on the results of the OCS DCD Heart Trial.

For example, the global economy has experienced extreme volatility and disruptions, including significant volatility in commodity and market prices, declines in consumer confidence, declines in economic growth, supply chain interruptions, uncertainty about economic stability and record inflation globally.

Unfavorable economic conditions could result in a variety of risks to our business, including demand and pricing for our products and difficulty in forecasting our financial results.

A weak or declining economy also could strain our suppliers, possibly resulting in supply chain disruptions.

Components of Our Results of Operations

2 unchanged sentences

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

We also generate revenue by providing outsourced organ retrieval and OCS organ management services under our National OCS Program.

All of our revenue has been generated by sales to transplant centers and Organ Procurement Organizations, not-for-profit organizations responsible for recovering organs from deceased donors for transplantation, in the United States, Europe and Asia-Pacific, or, in some cases, to distributors selling to transplant centers in select countries.

Substantially all of our customer contracts have multiple-performance obligations that contain promises consisting of OCS Perfusion Sets and OCS Solutions.

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

In some of those contracts, the promises also include an OCS Console, whether sold or loaned to the customer, as well as organ retrieval and OCS organ management services under our National OCS Program.

We have customer agreements under which we loan our OCS Consoles to the customer for the duration of the agreement.

4 unchanged sentences

For these reasons, we have determined that part of the selling price for the disposable set is an implied rental payment for use of the OCS Console.

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

When a customer order includes disposable sets and organ retrieval or OCS organ management services, we have determined that the disposable sets and services constitute separate performance obligations and we recognize revenue as the disposable sets and services are delivered to the customer.

Net revenue relating to organ retrieval and OCS organ management services sold under our National OCS Program represented approximately 13% of net revenue for the three months ended June 30, 2022 and less than 10% of net revenue for the six months ended June 30, 2022.

Under some of our customer clinical trial agreements, we made payments to our customers for reimbursements of clinical trial materials and for specified clinical documentation related to their use of our OCS products.

Because some of these payments did not provide us with a separately identifiable benefit, we recorded such payments as a reduction of revenue from the customer, resulting in our net revenue presentation.

We did not record any reimbursable clinical trial costs as a reduction of revenue for the three months ended March 31, 2022.

We recorded reimbursable clinical trial costs as a reduction of revenue of $0.6 million for the three months ended March 31, 2021.

Through March 31, 2022, all of our sales outside of the United States have been commercial sales (unrelated to any clinical trials).

We did not record any reimbursable clinical trial costs as a reduction of revenue for the three and six months ended June 30, 2022.

We recorded reimbursable clinical trial costs as a reduction of revenue of $0.5 million and $1.1 million for the three and six months ended June 30, 2021, respectively.

Through June 30, 2022, all of our sales outside of the United States have been commercial sales (unrelated to any clinical trials).

Our sales in the EU are dependent on maintaining the CE Mark certification.

We applied for re-certification of our CE Marks in the EU under the EU Medical Devices Regulation (Regulation 2017/745), or the MDR, for each of the OCS Heart, the OCS Lung and the OCS Liver, which will otherwise expire in September 2022.

Given the delays in processing re-certifications experienced by our notified body as a result of the new MDR process, we believe it is possible that one or more of our CE Marks may not be re-certified by such date.

In that event, we anticipate that sales of our OCS products in the EU would be limited to the level of inventory that was shipped to our EU distribution center prior to that date and would not increase until we obtain the relevant re-certifications.

Failure to recertify the CE Marks prior to their expiration in September 2022 may therefore have a negative impact on our revenue and financial results.

We expect that our net revenue will increase over the long term as a result of receiving PMAs for the OCS Lung, OCS Heart and OCS Liver in the United States.

Additionally, commercial sales of OCS disposable sets generally have a higher average selling price than clinical trial sales of OCS disposable sets.

We also expect that our net revenue will increase over the long term as a result of anticipated growth in non-U.S.

sales if national healthcare systems begin to reimburse transplant centers for the use of the OCS, if transplant centers utilize the OCS in more transplant cases, and if more transplant centers adopt the OCS in their programs.

sales could be impacted by any delays in the CE Mark re-certification process.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue consists primarily of costs of components of our OCS Consoles and disposable sets, costs of direct materials, labor and the manufacturing overhead that directly supports production, and costs related to the depreciation of OCS Consoles loaned to customers.

Cost of revenue consists primarily of costs of components of our OCS Consoles and disposable sets, costs of direct materials, labor and the manufacturing overhead that directly supports production, depreciation of OCS Consoles loaned to customers and the cost of services provided for organ retrieval and OCS organ management services.

When we loan an OCS Console to a customer for its use free of charge, we capitalize as property and equipment the cost of our OCS Console and depreciate these assets over the five-year estimated useful life of the console.

27 unchanged sentences

Interest expense consists of interest expense associated with outstanding borrowings under our loan agreement as well as the amortization of debt discount associated with such agreement.

We expect our interest expense will increase in connection with a net increase in borrowings under our credit agreement with CIBC, under which we borrowed $60.0 million in July 2022.

At that time, we repaid the remaining $35.0 million of principal that had been outstanding under our prior credit agreement with OrbiMed, thereby increasing our total debt by $25.0 million.

Other Income (Expense), Net

3 unchanged sentences

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

(in thousands)

7 unchanged sentences

Interest expense

Other expense, net

Other income (expense), net

Total other expense, net

1 unchanged sentence

Provision for income taxes

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands)

8 unchanged sentences

Total net revenue

Net revenue from customers in the United States was $13.6 million in the three months ended March 31, 2022 and increased by $7.8 million compared to the three months ended March 31, 2021, primarily due to higher sales volumes of our OCS Liver and OCS Heart disposable sets as a result of the FDA approval for these two products in the third quarter of 2021.

This increase was partially offset by lower sales volumes of our OCS Lung disposable sets.

Net revenue from sales of OCS Liver disposable sets in the United States increased by $7.4 million due primarily to higher sales volumes of OCS Liver disposable sets resulting from the recent FDA approval of the OCS Liver product along with the expansion of our National OCS Program to provide a streamlined solution for transplant centers to use the OCS Liver.

Net revenue from sales of OCS Heart disposable sets in the United States increased by $0.7 million also primarily as a result of the FDA approval of the OCS Heart in the third quarter of 2021.

Both the OCS Heart and the OCS Liver were approved for commercial sale in September 2021, which has provided the opportunity for increased sales volumes and pricing.

Net revenue from sales of OCS Lung disposable sets in the United States decreased by $0.4 million due to lower sales volumes of OCS Lung disposable sets, which were negatively impacted by the Omicron variant of COVID-19 in the early part of the first quarter of 2022.

Net revenue from customers outside the United States was $2.3 million in the three months ended March 31, 2022 compared to $1.3 million in the three months ended March 31, 2021.

The increase in net revenue from customers outside the United States was primarily due to a progressive return to pre-COVID-19 volumes of transplant procedures in the European

Net revenue from sales of OCS Heart disposable sets outside the United States increased by $ 0.8 million due to increased sales volume of OCS Heart d isposable sets .

Net revenue from OCS Lung d isposable sets increased by $ 0.2 million from the three months ended March 31, 2021 to the three months ended March 31, 2022 due to higher sales volumes of OCS Lung disposable sets .

Net revenue from customers in the United States was $18.1 million in the three months ended June 30, 2022 and increased by $12.4 million compared to the three months ended June 30, 2021, primarily due to higher sales volumes of our OCS Liver and OCS Heart disposable sets as a result of the FDA approval for these two products in the third quarter of 2021 along with the expansion of our National OCS Program to provide a streamlined solution for transplant centers to use the OCS for all FDA-approved indications for lung, heart and liver.

Net revenue from customers who participated in our National OCS Program accounted for approximately 84% of total net revenue from customers in the United States for the three months ended June 30, 2022.

Net revenue for each of our disposable products in the table above includes net revenue from sales of disposable sets as well as service revenue for organ retrieval and OCS organ management services under the National OCS Program.

Net revenue relating to organ retrieval and OCS organ management services sold under our National OCS Program represented approximately 13% of net revenue for the three months ended June 30, 2022.

The increase in OCS Liver and OCS Heart net revenue was partially offset by lower sales volumes of our OCS Lung disposable sets.

Net revenue from sales of OCS Liver disposable sets in the United States increased by $9.6 million due primarily to higher sales volumes of OCS Liver disposable sets resulting from the recent FDA approval of the OCS Liver product.

Net revenue from sales of OCS Heart disposable sets in the United States increased by $3.6 million also primarily as a result of the FDA approval of the OCS Heart in the third quarter of 2021 and the additional DCD Heart PMA supplement indication approved by the FDA in April 2022.

Net revenue from sales of OCS Lung disposable sets in the United States decreased by $0.8 million due to a decrease in sales volumes of OCS Lung disposable sets.

Net revenue from customers outside the United States was $2.4 million in each of the three months ended June 30, 2022 and 2021.

While the sales volumes of disposable sets outside of the United Sets increased from the three months ended June 30, 2021 to the three months ended June 30, 2022, an unfavorable impact of foreign exchange rates of $0.2 million fully offset the increase in sales volumes.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue increased by $1.5 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Gross profit increased by $7.3 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Gross margin was 76% and 68% for the three months ended March 31, 2022 and 2021, respectively.

Gross margin increased primarily as a result economies of scale from higher sales volumes and an increase in pricing.

Cost of revenue increased by $3.6 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

Gross profit increased by $8.8 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

Gross margin was 70% and 68% for the three months ended June 30, 2022 and 2021, respectively.

Gross margin increased primarily as a result of economies of scale from higher sales volumes.

Operating Expenses

Research, Development and Clinical Trials Expenses

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands)

4 unchanged sentences

Total research, development and clinical trials expenses

Total research, development and clinical trials expenses increased by $3.0 million from $4.5 million in the three months ended March 31, 2021 to $7.5 million in the three months ended March 31, 2022.

Consulting and third-party testing, laboratory supplies and research materials and other costs increased by $2.2 million, $0.7 million and $0.4 million, respectively, due to increased activity in our next generation program and ongoing existing research activities.

Total research, development and clinical trials expenses increased by $0.4 million from $6.3 million in the three months ended June 30, 2021 to $6.7 million in the three months ended June 30, 2022.

Personnel related, laboratory supplies and research materials and other costs increased by $0.2 million, $0.4 million and $0.3 million, respectively, due to increased activity in our next generation program and ongoing existing research activities.

Clinical trial costs decreased by $0.5 million due to the completion of pre-market approval clinical trial enrollment activity following the approval of the OCS Heart and OCS Liver by the FDA in September 2021.

Selling, General and Administrative Expenses

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands)

3 unchanged sentences

Total selling, general and administrative expenses

Total selling, general and administrative expenses increased by $7.2 million from $6.8 million in the three months ended March 31, 2021 to $13.9 million in the three months ended March 31, 2022 due to increases in personnel related costs, professional and consultant fees, tradeshows and conferences and other costs.

Total selling, general and administrative expenses increased by $8.2 million from $9.2 million in the three months ended June 30, 2021 to $17.4 million in the three months ended June 30, 2022 due to increases in personnel related costs, professional and consultant fees, tradeshows and conferences and other costs.

Personnel related costs increased by $4.3 million primarily due to the continued expansion of our team to support the National OCS Program and commercial growth of our OCS Lung, OCS Heart and OCS Liver products in the United States, as well as an increase in stock-based compensation expense of $0.5 million due primarily to additional grants to new and existing employees.

Professional and consultant fees increased by $0.3 million due to additional sales and administration costs related to the expansion of our National OCS Program.

Tradeshows and conferences costs increased by $0.3 million as a result of an increase in activities as restrictions implemented in response to the COVID-19 pandemic were eased.

Other costs increased by $1.7 million due to increased logistics costs related to the expansion of our National OCS Program.

Tradeshows and conferences costs increased by $0.6 million due to more in-person conferences during 2022 than in 2021.

Other costs increased by $3.1 million due to increased start-up and logistics costs related to the expansion of our National OCS Program.

Other Income (Expense)

Interest Expense

Interest expense was $1.0 million for each of the three months ended March 31, 2022 and 2021.

Interest expense was $1.0 million for each of the three months ended June 30, 2022 and 2021.

Other Expense, Net

Other expense, net for the three months ended March 31, 2022 and 2021 included interest income of less than $0.1 million in each period resulting from interest earned on invested cash balances, and $0.2 million and $0.5 million of realized and unrealized foreign currency transactions losses, respectively.

Other expense, net for the three months ended June 30, 2022 and 2021 included interest income of less than $0.1 million in each period resulting from interest earned on invested cash balances, and $0.8 million of realized and unrealized foreign currency transactions losses and $0.1 million of realized and unrealized foreign currency transactions gains, respectively.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the six months ended June 30, 2022:

Six Months Ended June 30,

(in thousands)

Cost of revenue

Operating expenses:

Research, development and clinical trials

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest expense

Other income (expense), net

Total other expense, net

Loss before income taxes

Provision for income taxes

Six Months Ended June 30,

(in thousands)

Net revenue by geography:

United States

Outside the U.S.

Total net revenue

Net revenue by OCS product:

OCS Lung net revenue

OCS Heart net revenue

OCS Liver net revenue

Total net revenue

Net revenue from customers in the United States was $31.7 million in the six months ended June 30, 2022 and increased by $20.2 million compared to the six months ended June 30, 2021, primarily due to higher sales volumes of our OCS Liver and OCS Heart disposable sets as a result of the FDA approval for these two products in the third quarter of 2021 along with the expansion of our National OCS Program to provide a streamlined solution for transplant centers to use the OCS for all FDA-approved indications for lung, heart and liver.

Net revenue from customers who participated in our National OCS Program accounted for approximately 81% of total net revenue from customers in the United States for the six months ended June 30, 2022.

Net revenue relating to organ retrieval and OCS organ management services sold under our National OCS Program represented less than 10% of net revenue for the six months ended June 30, 2022.

The increase in OCS Liver and OCS Heart net revenue was partially offset by lower sales volumes of our OCS Lung disposable sets.

Net revenue from sales of OCS Liver disposable sets in the United States increased by $17.0 million due primarily to higher sales volumes of OCS Liver disposable sets resulting from the recent FDA approval of the OCS Liver product.

Net revenue from sales of OCS Heart disposable sets in the United States increased by $4.3 million also primarily as a result of the FDA approval of the OCS Heart in the third quarter of 2021 and the additional DCD Heart PMA supplement indication approved by the FDA in April 2022.

Net revenue from sales of OCS Lung disposable sets in the United States decreased by $1.2 million due to a decrease in sales volumes of OCS Lung disposable sets.

Net revenue from customers outside the United States was $4.7 million in the six months ended June 30, 2022 compared to $3.7 million in the six months ended June 30, 2021.

The increase in net revenue from customers outside the United States was primarily due to a progressive return to pre-COVID-19 volumes of transplant procedures in the European market.

Net revenue from sales of OCS Heart disposable sets outside the United States increased by $0.7 million due to increased sales volumes of OCS Heart disposable sets.

Net revenue from OCS Lung disposable sets increased by $0.3 million from the six months ended June 30, 2021 to the six months ended June 30, 2022 due to higher sales volumes of OCS Lung disposable sets.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue increased by $5.1 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Gross profit increased by $16.1 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Gross margin was 73% and 68% for the six months ended June 30, 2022 and 2021, respectively.

Gross margin increased primarily as a result of economies of scale from higher sales volumes.

Operating Expenses

Research, Development and Clinical Trials Expenses

Six Months Ended June 30,

(in thousands)

Personnel related (including stock-based

compensation expense)

Clinical trials costs

Consulting and third-party testing

Laboratory supplies and research materials

Total research, development and clinical trials

Total research, development and clinical trials expenses increased by $3.4 million from $10.8 million in the six months ended June 30, 2021 to $14.2 million in the six months ended June 30, 2022.

Personnel related costs increased by $0.3 million primarily due to an increase in stock-based compensation expense related to additional grants to new and existing employees.

Consulting and third-party testing, laboratory supplies and research materials and other costs increased by $2.3 million, $1.1 million and $0.7 million, respectively, due to increased activity in our next generation program and ongoing existing research activities.

Clinical trial costs decreased by $0.9 million due to the completion of pre-market approval clinical trial enrollment activity following the approval of the OCS Heart and OCS Liver by the FDA in September 2021.

Selling, General and Administrative Expenses

Six Months Ended June 30,

(in thousands)

Personnel related (including stock-based

compensation expense)

Professional and consultant fees

Tradeshows and conferences

Total selling, general and administrative

Total selling, general and administrative expenses increased by $15.4 million from $15.9 million in the six months ended June 30, 2021 to $31.3 million in the six months ended June 30, 2022 due to increases in personnel related costs, professional and consultant fees, tradeshows and conferences and other costs.

Personnel related costs increased by $8.8 million primarily due to the continued expansion of our team to support the National OCS Program and commercial growth of our OCS Lung, OCS Heart and OCS Liver products in the United States, as well as an increase in stock-based compensation expense of $1.5 million due primarily to additional grants to new and existing employees.

Professional and consultant fees increased by $1.0 million due to additional sales and administration costs related to the expansion of our National OCS Program.

Tradeshows and conferences costs increased by $0.8 million as a result of an increase in in-person activities as restrictions implemented in response to the COVID-19 pandemic were eased.

Other costs increased by $4.8 million due to increased start-up and logistics costs related to the expansion of our National OCS Program.

Other Income (Expense)

Interest Expense

Interest expense was $1.9 million for each of the six months ended June 30, 2022 and 2021.

Other Expense, Net

Other expense, net for the six months ended June 30, 2022 and 2021 included interest income of less than $0.1 million and $0.1 million, respectively, resulting from interest earned on invested cash balances, and $1.1 million and $0.4 million of realized and unrealized foreign currency transactions losses, respectively.

Liquidity and Capital Resources

1 unchanged sentence

To date, we have funded our operations primarily with proceeds from sales of preferred stock and borrowings under loan agreements, proceeds from the sale of common stock in our public offerings and revenue from clinical trials and commercial sales of our OCS products.

As of March 31, 2022, we had cash, cash equivalents, and marketable securities of $72.0 million.

As of June 30, 2022, we had cash, cash equivalents, and marketable securities of $58.1 million.

The following table summarizes our sources and uses of cash for each of the periods presented:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

2 unchanged sentences

Net cash provided by financing activities

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

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

Effect of exchange rate changes on cash, cash equivalents and

restricted cash

Net increase in cash, cash equivalents and restricted cash

Operating Activities

During the three months ended March 31, 2022, operating activities used $18.4 million of cash, primarily resulting from our net loss of $10.6 million and net cash used by changes in our operating assets and liabilities of $11.4 million, partially offset by net non-cash charges of $3.6 million.

Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2022 consisted primarily of an increase in accounts receivable of $5.8 million, an increase in inventory of $2.9 million and a decrease in accounts payable and accrued expenses and other current liabilities of $4.0 million, partially offset by an increase in operating lease liabilities of $1.2 million related to the reimbursement of tenant improvement costs.

During the three months ended March 31, 2021, operating activities used $7.3 million of cash, primarily resulting from our net loss of $7.9 million and net cash used by changes in our operating assets and liabilities of $2.0 million, partially offset by net non-cash charges of $2.6 million.

Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2021 consisted primarily of a $0.9 million increase in prepaid expenses and other current assets, a $0.6 million increase in accounts receivable, a $0.4 million increase in inventory and a $0.3 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $0.2 million increase in deferred revenue.

During the six months ended June 30, 2022, operating activities used $27.5 million of cash, primarily resulting from our net loss of $22.1 million and net cash used by changes in our operating assets and liabilities of $13.4 million, partially offset by net non-cash charges of $8.0 million.

Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2022 consisted primarily of an increase in accounts receivable of $7.1 million, an increase in inventory of $4.2 million, an increase in prepaid expenses of $1.2 million, and a decrease in accounts payable and accrued expenses and other liabilities of $1.9 million, partially offset by an increase in operating lease liabilities of $0.9 million.

During the six months ended June 30, 2021, operating activities used $12.9 million of cash, primarily resulting from our net loss of $18.6 million, partially offset by net cash provided by changes in our operating assets and liabilities of $0.6 million and net non-cash charges of $5.2 million.

Net cash provided by changes in our operating assets and liabilities for the six months ended June 30, 2021 consisted primarily of a decrease in accounts receivable of $0.6 million and an increase in accounts payable and accrued expenses and other current liabilities of $2.9 million, partially offset by a $1.9 million increase in inventory and a $1.2 million increase in prepaid expenses and other current assets.

Changes in accounts receivable, inventory, accounts payable, and accrued expenses and other current liabilities in each reporting period are generally due to growth in our business and timing of invoices and payments.

Investing Activities

During the three months ended March 31, 2022, net cash provided by investing activities of $10.5 million consisted of proceeds from sales and maturities of marketable securities of $14.5 million, partially offset by purchases of marketable securities of $2.0 million and purchases of property and equipment of $2.0 million.

During the three months ended March 31, 2021, net cash provided by investing activities of $9.3 million consisted of proceeds from sales and maturities of marketable securities of $21.0 million, partially offset by $11.7 million in purchases of marketable securities.

During the six months ended June 30, 2022, net cash provided by investing activities of $32.5 million consisted of proceeds from sales and maturities of marketable securities of $48.3 million, partially offset by purchases of marketable securities of $9.5 million and purchases of property and equipment of $6.2 million.

During the six months ended June 30, 2021, net cash provided by investing activities of $13.1 million consisted of proceeds from sales and maturities of marketable securities of $58.8 million, partially offset by purchases of marketable securities of $45.5 million and purchases of property and equipment of $0.3 million.

Financing Activities

During the three months ended March 31, 2022, net cash provided by financing activities of $0.4 million consisted of proceeds from the issuance of common stock upon exercise of stock options of $0.2 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $0.2 million.

During the three months ended March 31, 2021, net cash provided by financing activities of $0.6 million consisted of proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $0.2 million and proceeds from the issuance of common stock upon exercise of stock options of $0.4 million.

During the six months ended June 30, 2022, net cash provided by financing activities of $0.6 million consisted of proceeds from the issuance of common stock upon exercise of stock options of $0.4 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $0.2 million.

During the six months ended June 30, 2021, net cash provided by financing activities of $0.8 million consisted of proceeds from the issuance of common stock in connection with the employee stock purchase plan of $0.2 million and proceeds from the issuance of common stock upon exercise of stock options of $0.6 million.

Long-Term Debt

We have a Credit Agreement with OrbiMed, pursuant to which we borrowed $35.0 million.

Borrowings under the Credit Agreement bear interest at an annual rate equal to the LIBOR subject to a minimum of 1.0% and a maximum of 4.0%, plus 8.5%, or the Applicable Margin, subject in the aggregate to a maximum interest rate of 11.5%.

In addition, borrowings under the Credit Agreement bear paid-in-kind, or PIK interest, at an annual rate equal to the amount by which LIBOR plus the Applicable Margin exceeds 11.5%, but not to exceed 12.5%.

The PIK interest is added to the principal amount of the borrowings outstanding at the end of each quarter until the maturity date of the Credit Agreement in June 2023.

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 our option, we may prepay outstanding borrowings under the Credit Agreement.

We are required to make a final payment in an amount equal to 3.0% of the principal amount of any prepayment or repayment, which we are accreting to interest expense over the term of the Credit Agreement using the effective interest method.

All obligations under the Credit Agreement are guaranteed by us and each of our material subsidiaries.

In July 2022, we entered into a credit agreement with CIBC pursuant to which we borrowed $60.0 million, referred to herein as the CIBC Credit Agreement.

We used $36.3 million of proceeds of the CIBC Credit Agreement to repay all amounts due under a credit agreement with OrbiMed, entered into in June 2018.

Borrowings under the CIBC Credit Agreement bear interest at an annual rate equal to either, at our option, (i) the secured overnight financing rate for an interest period selected by us, subject to a minimum of 1.5%, plus 2.0% or (ii) 1.0%

plus the higher of a) the prime rate subject to a minimum of 4.0% or b) the Federal Funds Effective Rate , plus 0.5% .

Borrowings under the CIBC Credit Agreement are payable in monthly interest-only payments for the first 24 months, and then payable in equal monthly principal payments plus accrued interest until the maturity date of the CIBC Credit Agreement in J uly 2027.

If certain revenue milestones are met after the first 24 months, we may extend the interest-only repayment period by one additional year.

At our option, we may prepay borrowings outstanding under the CIBC Credit Agreement, subject to a prepayment fee of 2.0% of outstanding borrowings if paid prior to 12 months after the closing date, and 1.0% if paid after 12 months but prior to 24 months after the closing date.

All obligations under the CIBC Credit Agreement are guaranteed by us and each of our material subsidiaries.

All obligations of us and each guarantor are secured by substantially all of our and each guarantor’s assets, including their intellectual property, subject to certain exceptions, including a perfected security interest in substantially all tangible and intangible assets of us and each guarantor.

Under the Credit Agreement, we have agreed to certain affirmative and negative covenants to which we will remain subject until maturity.

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

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

Under the CIBC Credit Agreement, we have agreed to certain affirmative and negative covenants to which we will remain subject until maturity.

The financial covenants include (x) a requirement to maintain a minimum liquidity amount of the greater of either (i) Trailing Four Month EBITDA Burn (as defined in the CIBC Credit Agreement) (only if EBITDA is negative) and (ii) $10.0 million, and (y) a requirement to maintain total net revenue of at least 75% of the level set forth in the total revenue plan presented to CIBC;

the requirement, on an annual basis, to deliver to CIBC annual audited financial statements with an unqualified audit opinion from our independent registered public accounting firm (subject to customary exceptions) and a requirement to deliver monthly and quarterly unaudited financial statements;

and restrictions on our activities, including limitations on dispositions, mergers or acquisitions;

4 unchanged sentences

and engaging in certain other business transactions.

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 our business), failure to comply with certain covenants, including the minimum liquidity and unqualified audit opinion covenants, and a material adverse change in our business, operations or other financial condition.

As of March 31, 2022, we were in compliance with all of the covenants under the Credit Agreement.

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

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

The obligations under the CIBC 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 our business), failure to comply with certain covenants, including the minimum liquidity and audit opinion covenants, failure to maintain deposit accounts with CIBC, and a material adverse change in our business, operations or financial condition.

During the continuance of an event of default, the interest rate per annum will be equal to the rate that would have otherwise been applicable at the time of the event of default plus 2.0%.

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

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

In addition, we 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.

While we do not expect that the transition from LIBOR, including any legal or regulatory changes made in response to its future phase out, or the risks related to its discontinuance will have a material effect on our financing costs, the impact is uncertain at this time.

Funding Requirements

As we continue to pursue and increase commercial sales of our OCS products, we expect our costs and expenses to increase in the future, particularly as we expand our commercial team, grow our National OCS Program, scale our manufacturing operations, continue research, development and clinical trial efforts, and seek regulatory approval for new products and product enhancements, including new indications, both in the United States and in select non-U.S.

As we continue to pursue and increase commercial sales of our OCS products, we expect our costs and expenses to increase in the future, particularly as we expand our commercial team, grow our National OCS Program, scale our manufacturing and sterilization operations, continue research, development and clinical trial efforts, and seek regulatory approval for new products and product enhancements, including new indications, both in the United States and in select non-U.S.

For example, if the demand for our products exceeds our existing manufacturing and sterilization capacity, our ability to fulfill orders would be limited until we have sufficiently expanded such operations.

In addition, following the closing of our IPO, we have incurred and expect to continue to incur additional costs associated with operating as a public company.

7 unchanged sentences

the costs, timing and outcomes of post-approval studies or any future clinical studies and regulatory reviews, including to seek and obtain approvals for new indications for our OCS products;

the emergence of competing or complementary technologies;

the emergence of competing or complementary technologies or procedures ;

the number and types of future products we develop and commercialize;

the cost of development of the next generation OCS

the costs associated with building our commercial operations;

1 unchanged sentence

the level of our selling, general and administrative expenses.

We believe that our existing cash, cash equivalents, and marketable securities will enable us to fund our operating expenses, capital expenditure requirements, and debt service payments for at least 12 months following the filing of this Quarterly Report on Form 10-Q.

We believe that our existing cash, cash equivalents, and marketable securities, in addition to the net proceeds from our debt financing in July 2022, will enable us to fund our operating expenses, capital expenditure requirements, and debt service payments for at least 12 months following the filing of this Quarterly Report on Form 10-Q.

We may need to raise additional funding, which might not be available on favorable terms or at all.

10 unchanged sentences

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 2. Management’s Discussion and Analysis