Company Quick10K Filing
Transmedics
Price24.73 EPS-1
Shares21 P/E-21
MCap523 P/FCF-21
Net Debt-53 EBIT-21
TEV469 TEV/EBIT-22
TTM 2019-09-28, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-05-07
10-K 2020-12-31 Filed 2021-03-11
10-Q 2020-09-30 Filed 2020-11-06
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-28 Filed 2020-03-17
10-Q 2019-09-28 Filed 2019-11-08
10-Q 2019-06-29 Filed 2019-08-08
S-1 2019-04-05 Public Filing
10-Q 2019-03-30 Filed 2019-06-12
8-K 2020-11-04
8-K 2020-08-05
8-K 2020-06-04
8-K 2020-06-02
8-K 2020-06-01
8-K 2020-05-26
8-K 2020-05-26
8-K 2020-05-06
8-K 2020-04-27
8-K 2020-04-20
8-K 2020-04-10
8-K 2020-03-02
8-K 2020-02-27
8-K 2020-01-13
8-K 2020-01-09
8-K 2019-11-06
8-K 2019-08-07
8-K 2019-06-11
8-K 2019-06-03
8-K 2019-05-01

TMDX 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits.
EX-31.1 tmdx-ex311_9.htm
EX-31.2 tmdx-ex312_6.htm
EX-32.1 tmdx-ex321_8.htm
EX-32.2 tmdx-ex322_7.htm

Transmedics Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
12560-5-70-135-2002018201820192020
Assets, Equity
10.06.02.0-2.0-6.0-10.02018201820192020
Rev, G Profit, Net Income
100704010-20-502018201820192020
Ops, Inv, Fin

10-Q 1 tmdx-10q_20210331.htm 10-Q tmdx-10q_20210331.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission File Number: 001-38891

 

TransMedics Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

Massachusetts

83-2181531

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

200 Minuteman Road

Andover, Massachusetts

01810

(Address of principal executive offices)

(Zip code)

 

(978) 552-0900

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class 

 

Trading Symbol(s) 

 

Name of each exchange on which registered 

Common Stock, No Par Value

 

TMDX

 

The Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 30, 2021, the registrant had 27,623,887 shares of common stock, no par value per share, outstanding.

 

 

 

 


 

 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “could,” “target,” “predict,” “seek” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referenced in the section titled “Risk Factors,” which could cause actual results to differ materially. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in or implied by any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report. You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or reflect interim developments.

Some of the key factors that could cause actual results to differ include:

 

that we continue to incur losses;

 

our need to raise additional funding;

 

our existing and any future indebtedness, including our ability to comply with affirmative and negative covenants under our credit agreement to which we will remain subject to until maturity, and our ability to obtain additional financing on favorable terms or at all;

 

the fluctuation of our financial results from quarter to quarter;

 

our ability to use net operating losses and research and development credit carryforwards;

 

our dependence on the success of the Organ Care System, or OCS;

 

the rate and degree of market acceptance of the OCS;

 

our ability to educate patients, surgeons, transplant centers and private and public payors of benefits offered by the OCS;

 

the impact of the outbreak of the novel strain of coronavirus, or COVID-19, and associated containment and remediation efforts;

 

our ability to improve the OCS platform;

 

our dependence on a limited number of customers for a significant portion of our net revenue;

 

the timing of and our ability to obtain and maintain regulatory approvals or clearances for our OCS products;

 

our ability to adequately respond to the Food and Drug Administration, or FDA, follow-up inquiries in a timely manner;

 

the performance of our third-party suppliers and manufacturers;

 

the timing or results of clinical trials for the OCS;

 

our manufacturing, sales, marketing and clinical support capabilities and strategy;

 

attacks against our information technology infrastructure;

 

the economic, political and other risks associated with our foreign operations;

 

our ability to attract and retain key personnel;

i


 

 

 

our ability to protect, defend, maintain and enforce our intellectual property rights relating to the OCS and avoid allegations that our products infringe, misappropriate or otherwise violate the intellectual property rights of third parties;

 

the pricing of the OCS, as well as the reimbursement coverage for the OCS in the United States and internationally;

 

regulatory developments in the United States, European Union and other jurisdictions;

 

the extent and success of competing products that are or may become available;

 

the impact of any product recalls or improper use of our products;

 

our use of proceeds from our equity offerings; and

 

our estimates regarding revenues, expenses and needs for additional financing.

ii


 

 

TransMedics Group, Inc.

Table of Contents

 

 

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

1

 

Consolidated Balance Sheets

 

1

 

Consolidated Statements of Operations

 

2

 

Consolidated Statements of Comprehensive Loss

 

3

 

Consolidated Statements of Stockholders’ Equity

 

4

 

Consolidated Statements of Cash Flows

 

5

 

Notes to Unaudited Consolidated Financial Statements

 

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

30

Item 4.

Controls and Procedures

 

30

 

 

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

31

Item 1A.

Risk Factors

 

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

31

Item 6.

Exhibits

 

32

Signatures

 

33

 

 

 

iii


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

TRANSMEDICS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,727

 

 

$

24,581

 

Marketable securities

 

 

91,386

 

 

 

101,061

 

Accounts receivable

 

 

7,395

 

 

 

6,864

 

Inventory

 

 

11,820

 

 

 

11,934

 

Prepaid expenses and other current assets

 

 

3,215

 

 

 

2,326

 

Total current assets

 

 

140,543

 

 

 

146,766

 

Property and equipment, net

 

 

4,734

 

 

 

4,754

 

Restricted cash

 

 

500

 

 

 

500

 

Other long-term assets

 

 

6

 

 

 

6

 

Total assets

 

$

145,783

 

 

$

152,026

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,289

 

 

$

1,206

 

Accrued expenses and other current liabilities

 

 

9,931

 

 

 

10,317

 

Deferred revenue

 

 

432

 

 

 

263

 

Current portion of deferred rent

 

 

105

 

 

 

93

 

Total current liabilities

 

 

11,757

 

 

 

11,879

 

Long-term debt, net of discount and current portion

 

 

34,787

 

 

 

34,657

 

Deferred rent, net of current portion

 

 

1,564

 

 

 

1,599

 

Total liabilities

 

 

48,108

 

 

 

48,135

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, no par value; 25,000,000 shares authorized; no shares

   issued or outstanding

 

 

 

 

 

 

Common stock, no par value; 150,000,000 shares authorized; 27,477,961

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

   and December 31, 2020, respectively

 

 

503,912

 

 

 

502,217

 

Accumulated other comprehensive loss

 

 

(89

)

 

 

(95

)

Accumulated deficit

 

 

(406,148

)

 

 

(398,231

)

Total stockholders' equity

 

 

97,675

 

 

 

103,891

 

Total liabilities and stockholders' equity

 

$

145,783

 

 

$

152,026

 

 

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

1


 

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net revenue

 

$

7,053

 

 

$

7,530

 

Cost of revenue

 

 

2,242

 

 

 

2,670

 

Gross profit

 

 

4,811

 

 

 

4,860

 

Operating expenses:

 

 

 

 

 

 

 

 

Research, development and clinical trials

 

 

4,532

 

 

 

6,225

 

Selling, general and administrative

 

 

6,786

 

 

 

6,652

 

Total operating expenses

 

 

11,318

 

 

 

12,877

 

Loss from operations

 

 

(6,507

)

 

 

(8,017

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(952

)

 

 

(1,042

)

Other income (expense), net

 

 

(454

)

 

 

217

 

Total other expense, net

 

 

(1,406

)

 

 

(825

)

Loss before income taxes

 

 

(7,913

)

 

 

(8,842

)

Provision for income taxes

 

 

(4

)

 

 

(10

)

Net loss

 

$

(7,917

)

 

$

(8,852

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(0.29

)

 

$

(0.42

)

Weighted average common shares outstanding,

   basic and diluted

 

 

27,368,090

 

 

 

21,221,385

 

 

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

2


 

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net loss

 

$

(7,917

)

 

$

(8,852

)

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(2

)

 

 

16

 

Unrealized gains on marketable securities,

   net of tax of $0

 

 

8

 

 

 

213

 

Total other comprehensive income

 

 

6

 

 

 

229

 

Comprehensive loss

 

$

(7,911

)

 

$

(8,623

)

 

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

3


 

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehen-

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

sive Income

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

(Loss)

 

 

Deficit

 

 

Equity

 

Balances at

   December 31, 2020

 

 

27,175,305

 

 

$

502,217

 

 

$

(95

)

 

$

(398,231

)

 

$

103,891

 

Issuance of common stock upon the

   exercise of common stock options

 

 

287,705

 

 

 

372

 

 

 

 

 

 

 

 

 

372

 

Issuance of common stock in connection

   with employee stock purchase plan

 

 

14,951

 

 

 

211

 

 

 

 

 

 

 

 

 

211

 

Stock-based compensation expense

 

 

 

 

 

1,112

 

 

 

 

 

 

 

 

 

1,112

 

Foreign currency translation

   adjustment

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Unrealized gains on marketable

   securities

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,917

)

 

 

(7,917

)

Balances at March 31, 2021

 

 

27,477,961

 

 

$

503,912

 

 

$

(89

)

 

$

(406,148

)

 

$

97,675

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehen-

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

sive Income

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

(Loss)

 

 

Deficit

 

 

Equity

 

Balances at

   December 28, 2019

 

 

21,184,524

 

 

$

424,134

 

 

$

(2

)

 

$

(369,483

)

 

$

54,649

 

Issuance of common stock upon the

   exercise of common stock options

 

 

146,793

 

 

 

75

 

 

 

 

 

 

 

 

 

75

 

Issuance of common stock in connection

   with employee stock purchase plan

 

 

12,163

 

 

 

197

 

 

 

 

 

 

 

 

 

197

 

Stock-based compensation expense

 

 

 

 

 

385

 

 

 

 

 

 

 

 

 

385

 

Foreign currency translation

   adjustment

 

 

 

 

 

 

 

 

16

 

 

 

 

 

 

16

 

Unrealized gains on marketable

   securities

 

 

 

 

 

 

 

 

213

 

 

 

 

 

 

213

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(8,852

)

 

 

(8,852

)

Balances at March 31, 2020

 

 

21,343,480

 

 

$

424,791

 

 

$

227

 

 

$

(378,335

)

 

$

46,683

 

 

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

 

4


 

 

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(7,917

)

 

$

(8,852

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

445

 

 

 

371

 

Stock-based compensation expense

 

 

1,112

 

 

 

385

 

Non-cash interest expense and end of term accretion expense

 

 

130

 

 

 

123

 

Net amortization of premiums on marketable securities

 

 

391

 

 

 

1

 

Unrealized foreign currency transaction losses

 

 

484

 

 

 

78

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(583

)

 

 

422

 

Inventory

 

 

(381

)

 

 

(241

)

Prepaid expenses and other current assets

 

 

(908

)

 

 

(120

)

Accounts payable

 

 

(82

)

 

 

(2,411

)

Accrued expenses and other current liabilities

 

 

(180

)

 

 

1,806

 

Deferred revenue

 

 

182

 

 

 

 

Deferred rent

 

 

(23

)

 

 

262

 

Net cash used in operating activities

 

 

(7,330

)

 

 

(8,176

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(20

)

 

 

(277

)

Purchases of marketable securities

 

 

(11,708

)

 

 

(4,168

)

Proceeds from sales and maturities of marketable securities

 

 

21,000

 

 

 

17,160

 

Net cash provided by investing activities

 

 

9,272

 

 

 

12,715

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments of public offering costs and other financing costs

 

 

 

 

 

(120

)

Proceeds from issuance of common stock upon exercise of stock options

 

 

372

 

 

 

75

 

Proceeds from issuance of common stock in connection with employee stock

   purchase plan

 

 

211

 

 

 

197

 

Net cash provided by financing activities

 

 

583

 

 

 

152

 

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

 

 

(379

)

 

 

(45

)

Net increase in cash, cash equivalents and restricted cash

 

 

2,146

 

 

 

4,646

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

25,081

 

 

 

20,592

 

Cash, cash equivalents and restricted cash, end of period

 

$

27,227

 

 

$

25,238

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Transfers of inventory to property and equipment

 

$

429

 

 

$

78

 

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

 

$

7

 

 

$

112

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,727

 

 

$

24,738

 

Restricted cash

 

 

500

 

 

 

500

 

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

 

$

27,227

 

 

$

25,238

 

 

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

5


 

TRANSMEDICS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of the Business and Basis of Presentation

TransMedics Group, Inc. (“TransMedics Group” and, together with its consolidated subsidiaries, the “Company”) was incorporated in the Commonwealth of Massachusetts in October 2018. TransMedics, Inc. (“TransMedics”), an operating company and wholly owned subsidiary of TransMedics Group, was incorporated in the State of Delaware in August 1998. The Company is a commercial-stage medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states. The Company developed the Organ Care System (“OCS”) to replace a decades-old standard of care. The OCS represents a paradigm shift that transforms organ preservation for transplantation from a static state to a dynamic environment that enables new capabilities, including organ optimization and assessment. The Company’s OCS technology replicates many aspects of the organ’s natural living and functioning environment outside of the human body.

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 $7.9 million for the three months ended March 31, 2021 and $28.7 million for the year ended December 31, 2020. As of March 31, 2021, the Company had an accumulated deficit of $406.1 million. The Company expects to continue to generate operating losses in the foreseeable future.

The Company believes that its existing cash, cash equivalents, and marketable securities of $118.1 million as of March 31, 2021 will be sufficient to fund its operations, capital expenditures, and debt service payments for at least the next 12 months following the filing of this Quarterly Report on Form 10-Q. The Company may need to seek additional funding through equity financings, debt financings or strategic alliances. The Company may not be able to obtain financing on acceptable terms, or at all, and the terms of any financing may adversely affect the holdings or the rights of the Company’s shareholders. If the Company is unable to obtain funding, the Company will be required to delay, reduce or eliminate some or all of its research and development programs, product expansion or commercialization efforts, or the Company may be unable to continue operations.

The Company is subject to risks and uncertainties common to companies in the medical device industry and of similar size, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, and the need to obtain additional financing to fund operations. Potential risks and uncertainties also include, without limitation, uncertainties regarding the duration and magnitude of the impact of the COVID-19 pandemic on the Company’s business and the economy generally. Products currently under development will require additional research and development efforts, including additional clinical testing and regulatory approval, prior to commercialization. These efforts require additional capital, adequate personnel, infrastructure and extensive compliance-reporting capabilities. The Company’s research and development may not be successfully completed, adequate protection for the Company’s technology may not be obtained, the Company may not obtain necessary government regulatory approval on its expected timeline or at all, and approved products may not prove commercially viable. The Company operates in an environment of rapid change in technology and competition.

The impact of the COVID-19 pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. Impacts to the Company’s business as a result of COVID-19 include the temporary disruption of transplant procedures at many of the organ transplant centers that purchase OCS products; disruptions to the Company’s manufacturing operations and supply chain caused by facility closures, reductions in operating hours, staggered shifts and other social distancing efforts; labor shortages; decreased productivity and unavailability of materials or components; restrictions on or delays of the Company’s clinical trials and studies; delays of reviews and approvals by the Food and Drug Administration (“FDA”) and other health authorities; limitations on its employees’ and customers’ ability to travel, and delays in product installations, trainings or shipments to and from affected countries and within the United States. In response to the pandemic, healthcare providers have, and may need to further, reallocate resources, such as physicians, staff, hospital beds and intensive care unit facilities, and these actions significantly delay the provision of other medical care such as organ transplantation and reduce the number of transplant procedures that are performed, which negatively impacts the Company’s revenue and clinical trial activities. The Company’s sales and clinical adoption team has been and may continue to be restricted in visiting many transplant centers in person. In addition, the Company had temporarily reduced the manufacturing and distribution of its OCS products at its facility in Andover, Massachusetts. Starting in May 2020, the Company resumed manufacturing and distribution operations to pre-COVID levels. While the Company maintains an inventory of finished products and raw materials used in its OCS products, a prolonged pandemic could lead to shortages in the raw materials necessary to manufacture its products. The COVID-19 pandemic also has impacted operations at the FDA and other health authorities, resulting in delays of reviews and approvals, including with respect to the Company’s OCS Heart Pre-Market Approval (“PMA”) application, and may affect other potential PMA applications. 

6


 

While the COVID-19 pandemic did not significantly impact the Company’s business or results of operations during the three months ended March 31, 2020, OCS product sales have been negatively impacted by the COVID-19 pandemic since the second quarter of 2020 and the Company anticipates a negative impact to OCS product sales in 2021. The extent of the future impact on the Company’s operations and financial condition will depend on the length and severity of the pandemic, its consequences, the effects of any variants as new strains evolve and containment and vaccination efforts. While the FDA approved emergency use authorization of vaccines in December 2020, it is expected to take several months for widespread vaccinations to occur and it is not yet fully known how vaccination efforts will impact the COVID-19 pandemic.

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited interim financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2021 and results of operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended in the same periods have been made. The Company’s results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, the valuation of inventory and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods. As of the date of issuance of these unaudited consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update estimates, judgments or revise the carrying value of any assets or liabilities. Actual results may differ from those estimates or assumptions.

Risk of Concentrations of Credit, Significant Customers and Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, 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.

Significant customers are those that accounted for 10% or more of the Company’s net revenue or accounts receivable. For the three months ended March 31, 2021, two customers accounted for 12% each of net revenue. For the three months ended March 31, 2020, one customer accounted for 17% of net revenue. As of March 31, 2021, two customers accounted for 23% and 16% of accounts receivable, respectively. As of December 31, 2020, one customer accounted for 30% of accounts receivable.

7


 

Certain of the components and subassemblies included in the Company’s products are obtained from a sole source, a single source or a limited group of suppliers. Although the Company seeks to reduce dependence on those limited sources of suppliers and manufacturers, the partial or complete loss of certain of these sources could have a material adverse effect on the Company’s operating results, financial condition and cash flows and damage its customer relationships.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

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

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 4). The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. The carrying value of the Company’s long-term debt approximates its fair value (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

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company is developing and commercializing a proprietary system to preserve human organs for transplant in a near-physiologic condition to address the limitations of cold storage organ preservation. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the Company’s chief operating decision maker, or decision-making group, in deciding how to allocate resources and assess performance. The Company has determined that its chief operating decision maker is its Chief Executive Officer. The Company’s chief operating decision maker reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and assessing financial performance.

Revenue Recognition

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.

8


 

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.

9


 

 

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

The Company has also determined that payments made to customers to obtain information related to post-approval studies or existing standard-of-care protocols (i.e., unrelated to the Company’s OCS products) do meet the criteria to be classified as a cost because the Company receives a distinct good or service transferred by the customer separate from the customer’s purchase of the Company’s OCS products and the consideration paid represents the fair value of the distinct good or service received by the Company. As a result, these payments made to the customers for information related to post-approval studies or standard-of-care protocols are recorded as operating expenses. The Company recorded payments made to customers related to post-approval studies and for documentation related to existing standard-of-care protocols of $0.5 million and $0.4 million for the three months ended March 31, 2021 and 2020, respectively, as operating expenses.

Variable Consideration

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 months ended March 31, 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 March 31, 2021 and December 31, 2020.

10


 

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, 2021, the Company’s wholly- or partially-unsatisfied performance obligations totaled $0.9 million and are expected to be completed within the next year.

Disaggregated Revenue

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 March 31,

 

 

 

2021

 

 

2020

 

Gross revenue from sales to customers

 

$

7,637

 

 

$

8,243

 

Less: clinical trial payments reducing

   revenue

 

 

584

 

 

 

713

 

Total net revenue

 

$

7,053

 

 

$

7,530

 

 

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 March 31,

 

 

 

2021

 

 

2020

 

Net revenue by OCS product:

 

 

 

 

 

 

 

 

OCS Lung net revenue

 

$

2,430

 

 

$

2,008

 

OCS Heart net revenue

 

 

4,181

 

 

 

4,131

 

OCS Liver net revenue

 

 

442

 

 

 

1,391

 

Total net revenue

 

$

7,053

 

 

$

7,530

 

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net revenue by country(1):

 

 

 

 

 

 

 

 

United States

 

$

5,757

 

 

$

5,208

 

United Kingdom

 

 

472

 

 

 

1,112

 

All other countries

 

 

824

 

 

 

1,210

 

Total net revenue

 

$

7,053

 

 

$

7,530

 

 

 

(1)

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

 

Other Revenue Considerations

The Company does not assess whether promised goods or services are performance obligations if they are deemed immaterial in the context of the contract with the customer. Additionally, the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

11


 

Distributors

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

Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock awards. For periods in which the Company reports a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for each of the three months ended and March 31, 2021 and 2020.

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

 

 

 

As of March 31,

 

 

 

2021

 

 

2020

 

Warrants to purchase common stock

 

 

64,440

 

 

 

64,440

 

Options to purchase common stock

 

 

2,764,876

 

 

 

2,178,215

 

Employee stock purchase plan

 

 

5,882

 

 

 

10,871

 

 

 

 

2,835,198

 

 

 

2,253,526

 

 

12


 

 

Recently Issued Accounting Pronouncements

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

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today. For public entities, the guidance has been effective for annual reporting periods beginning after December 15, 2018 and for interim periods within those 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. The Company is currently planning to adopt this guidance on January 1, 2022 in accordance with the nonpublic company requirements and is evaluating the method of adoption and the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326).  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. The Company is currently assessing the date of adoption and the impact of the adoption of this guidance on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes Simplifying the Accounting for Income Taxes (Topic 740). The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles as well as clarifying and amending existing guidance to improve consistent application. For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2020 and for interim periods within those fiscal years. For nonpublic entities, the guidance is effective for annual reporting periods beginning after December 15, 2021 and to interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted for all entities. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The Company is currently assessing the date of adoption and the impact of the adoption of this guidance on its consolidated financial statements.


13


 

 

3. Marketable Securities

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

 

 

March 31, 2021

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

U.S. Treasury securities (due within one year)

 

$

68,488

 

 

$

15

 

 

$

 

 

$

68,503

 

U.S. government agency bonds (due within one year)

 

 

22,879

 

 

 

4

 

 

 

 

 

 

22,883

 

 

 

$

91,367

 

 

$

19

 

 

$

 

 

$

91,386

 

 

 

December 31, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

U.S. Treasury securities (due within one year)

 

$

74,066

 

 

$

10

 

 

$

(3

)

 

$

74,073

 

U.S. government agency bonds (due within one year)

 

 

26,984

 

 

 

4

 

 

 

 

 

 

26,988

 

 

 

$

101,050

 

 

$

14

 

 

$

(3

)

 

$

101,061

 

 

 

4. Fair Value of Financial Assets and Liabilities

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 March 31, 2021 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

16,939

 

 

$

 

 

$

 

 

$

16,939

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

 

 

 

68,503

 

 

 

 

 

 

68,503

 

U.S. government agency bonds

 

 

 

 

 

22,883

 

 

 

 

 

 

22,883

 

 

 

$

16,939

 

 

$

91,386

 

 

$

 

 

$

108,325

 

 

 

 

Fair Value Measurements at December 31, 2020 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

13,829

 

 

$

 

 

$

 

 

$

13,829

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

 

 

 

74,073

 

 

 

 

 

 

74,073

 

U.S. government agency bonds

 

 

 

 

 

26,988

 

 

 

 

 

 

26,988

 

 

 

$

13,829

 

 

$

101,061

 

 

$

 

 

$

114,890

 

 

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. U.S. Treasury securities and U.S. 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 months ended March 31, 2021 and 2020, there were no transfers between Level 1, Level 2, and Level 3.

5. Inventory

Inventory consisted of the following (in thousands):

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Raw materials

 

$

6,142

 

 

$

6,770

 

Work-in-process

 

 

1,582