The 2019 Stock Incentive Plan (the “2019 Plan”) provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, unrestricted stock units, and other stock-based awards to employees, directors, and consultants of the Company and its subsidiaries. The number of shares of common stock of TransMedics Group initially available for issuance under the 2019 Plan was 3,428,571 shares, plus the number of shares underlying awards under the previously outstanding 2014 Stock Incentive Plan (the “2014 Plan”), not to exceed 1,595,189 shares, that expire or are terminated, surrendered, or cancelled without the delivery of shares, are forfeited to or repurchased by TransMedics Group or otherwise become available again for grant. Since the effectiveness of the Company’s 2019 Plan in April 2019, no awards have been made or will be made under the 2014 Plan.

Shares withheld in payment of the exercise or purchase price of an award or in satisfaction of tax withholding requirements, and the shares covered by a stock appreciation right for which any portion is settled in stock, will reduce the number of shares available for issuance under the 2019 Plan. In addition, the number of shares available for issuance under the 2019 Plan (i) will not be increased by any shares delivered under the 2019 Plan that are subsequently repurchased using proceeds directly attributable to stock option exercises and (ii) will not be reduced by any awards that are settled in cash or that expire, become unexercisable, terminate or are forfeited to or repurchased by TransMedics Group without the issuance of stock under the 2019 Plan. As of December 31, 2022, 820,336 shares of common stock were available for issuance under the 2019 Plan.

Pursuant to the Company’s 2019 Employee Stock Purchase Plan (the “2019 ESPP”), certain employees of the Company are eligible to purchase common stock of the Company at a reduced price during offering periods. The 2019 ESPP permits participants to purchase common stock using funds contributed through payroll deductions, subject to the limitations set forth in the Internal Revenue Code, at a purchase price of 85% of the lower of the closing price of the Company’s common stock on the first trading day of the offering period or the closing price on the applicable purchase date, which is the final trading day of the applicable offering period. A total of 371,142 shares of common stock of TransMedics Group were initially reserved for issuance under the 2019 ESPP. During the year ended December 31, 2022, 30,143 shares were issued under the 2019 ESPP and as of December 31, 2022, 290,453 shares remained available for issuance.

In August 2021, the Company’s board of directors approved the TransMedics Group, Inc. Inducement Plan (the “Inducement Plan”). Pursuant to the terms of the Inducement Plan, the Company may grant nonqualified stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock unit awards and performance awards to individuals who were not previously employees or directors of the Company or individuals returning to employment after a bona fide period of non-employment with the Company. A total of 1,000,000 shares of the Company’s common stock were initially available for issuance under the Inducement Plan. As of December 31, 2022, 478,938 shares of common stock remained available for issuance under the Inducement Plan.

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. Because there had been no public market for the Company's common stock prior to the Company's initial public offering, there is limited Company-specific historical and implied volatility data. Accordingly, the Company bases its estimates of expected volatility on a combination of the Company's own historical volatility and historical volatility of a group of publicly-traded companies with similar characteristics to itself. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time

periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

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


	Year Ended December 31,
	2022			2021			2020
Risk-free interest rate		2.33	%		0.90	%		0.91	%
Expected term (in years)		6.03			6.03			5.97
Expected volatility		59	%		58	%		54	%
Expected dividend yield		0	%		0	%		0	%

The following table summarizes the Company’s option activity since December 31, 2021:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2021		2,797,550		$	20.64		7.54	$	14,625
Granted		1,195,910			19.48
Exercised		(507,795	)		9.19
Forfeited		(186,586	)		27.45
Expired		(10,288	)		31.89
Outstanding as of December 31, 2022		3,288,791		$	21.56		7.86	$	132,076
Vested and expected to vest as of December 31, 2022		3,288,791		$	21.56		7.86	$	132,076
Options exercisable as of December 31, 2022		1,603,499		$	17.86		6.92	$	70,331

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020, was $15.0 million, $16.3 million and $2.9 million, respectively. The weighted average grant-date fair value of stock options granted during the years ended December 31, 2022, 2021 and 2020 was $11.32 per share, $18.63 per share and $7.91 per share, respectively.

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

During the year ended December 31, 2022, the Company granted shares of restricted common stock to certain non-employee service providers. The Company did not grant restricted common stock in either of the years ended December 31, 2021 and 2020. Shares of unvested restricted common stock may not be sold or transferred by the holder. If the holder’s service to the Company and its affiliates ceases for any reason, unvested shares of restricted common stock held by these individuals will immediately be forfeited for no consideration, as provided in the individual restricted stock agreements.

The following table summarizes the Company's restricted common stock activity since December 31, 2021:


	Shares			Weighted Average Grant Date Fair Value
Unvested restricted common stock as of December 31, 2021		—		$	—
Issued		26,093			28.74
Vested		—			—
Forfeited		(1,778	)		28.12
Unvested restricted common stock as of December 31, 2022		24,315		$	28.79

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


	Year Ended December 31,
	2022		2021		2020
Cost of revenue	$	125	$	72	$	27
Research, development and clinical trials expenses		1,465		1,114		396
Selling, general and administrative expenses		8,731		5,692		1,991
	$	10,321	$	6,878	$	2,414

As of December 31, 2022, total unrecognized compensation cost related to unvested share-based awards was $22.3 million, which is expected to be recognized over a weighted-average period of 2.5 years.