Pulmonx Corp [LUNG] Filings

10-Q 1 lung-20240630.htm 10-Q lung-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2024


☐			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: 001-39562

PULMONX CORPORATION

(Exact name of registrant as specified in its charter)



Delaware						77-0424412
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

700 Chesapeake Drive

Redwood City, California 94063

1-650-364-0400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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, $0.001 par value per share	LUNG	The Nasdaq Stock Market LLC

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 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, a 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 July 31, 2024 there were 39,152,553 shares of the Registrant’s Common Stock, par value $0.001 per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Securities and Use of Proceeds	100
Item 3.	Defaults Upon Senior Securities	100
Item 4.	Mine Safety Disclosures	100
Item 5.	Other Information	100
Item 6.	Exhibits	101
	Signatures	103

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, about us and our industry that involve substantial risks and uncertainties. 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 condition, business strategy, plans, and objectives of management for future operations and statements that are necessarily dependent upon future events are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “anticipate,” “project,” “target,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties, and assumptions, including risks described in the section entitled “Risk Factors.” These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors 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 from those contained in, or implied by, any forward-looking statements.

You should not rely on these forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, 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 or to conform these statements to actual results or to changes in our expectations, whether as a result of any new information, future events, changed circumstances or otherwise. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our ability to design, develop, manufacture and market innovative products to treat patients with challenging medical conditions, particularly those with severe chronic obstructive pulmonary disease (“COPD”) and emphysema;

•our expected future growth, including growth in international sales;

•our expected future growth of our sales and marketing organization;

•the size and growth potential of the markets for our products, and our ability to serve those markets;

•the rate and degree of market acceptance of our products;

•coverage and reimbursement for procedures performed using our products;

•the performance of third parties in connection with the development of our products, including third-party suppliers;

•regulatory developments in the United States and foreign countries;

•our ability to obtain and maintain regulatory approval or clearance of our products on expected timelines;

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•our plans to research, develop and commercialize our products and any other approved or cleared product;

•our ability to retain and hire our senior management and other highly qualified personnel;

•the development, regulatory approval, efficacy and commercialization of competing products and technologies in our industry;

•our ability to develop and maintain our corporate infrastructure, including an effective system of internal controls;

•our financial performance and capital requirements;

•our expectations regarding our ability to obtain and maintain intellectual property protection for our products, as well as our ability to operate our business without infringing the intellectual property rights of others; and

•our expectations regarding the impact of any public health crises, such as COVID-19, on our business, financial condition and results of operations.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

All brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Pulmonx” the “Company,” “we,” “us,” and “our” refer to Pulmonx Corporation.

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Part I. Financial Information

Item 1. Financial Statements

Pulmonx Corporation

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	June 30, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	63,464	$	83,547
Restricted cash	257		237
Short-term marketable securities	51,081		33,555
Accounts receivable, net	11,080		12,105
Inventory	16,980		16,743
Prepaid expenses and other current assets	3,297		4,235
Total current assets	146,159		150,422
Long-term marketable securities	—		14,390
Long-term inventory	2,300		2,580
Property and equipment, net	2,830		4,028
Goodwill	2,333		2,333
Intangible assets, net	—		31
Right of use assets	18,490		3,406
Other long-term assets	515		591
Total assets	$	172,627	$	177,781

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	3,181	$	1,497
Accrued liabilities	11,783		16,234
Income taxes payable	66		93
Deferred revenue	107		104
Short-term debt	93		2,155
Current lease liabilities	1,071		3,074
Total current liabilities	16,301		23,157
Deferred tax liability	118		114
Long-term lease liabilities	17,914		1,106
Long-term debt	37,110		35,089
Total liabilities	71,443		59,466
Commitments and contingencies (Note 8)

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Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2024 and December 31, 2023	—		—
Common stock, $0.001 par value, 200,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 39,151,861 shares issued and outstanding as of June 30, 2024 and 38,516,383 shares issued and outstanding as of December 31, 2023	39		39
Additional paid-in capital	539,408		526,797
Accumulated other comprehensive income	1,973		2,640
Accumulated deficit	(440,236)		(411,161)
Total stockholders’ equity	101,184		118,315
Total liabilities and stockholders’ equity	$	172,627	$	177,781

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

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Pulmonx Corporation

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	20,783	$	17,194	$	39,637	$	31,729
Cost of goods sold	5,476		4,460		10,252		8,406
Gross profit	15,307		12,734		29,385		23,323
Operating expenses
Research and development	5,615		5,710		9,825		9,963
Selling, general and administrative	25,314		23,463		49,718		46,199
Total operating expenses	30,929		29,173		59,543		56,162
Loss from operations	(15,622)		(16,439)		(30,158)		(32,839)
Interest income	1,306		1,410		2,747		2,537
Interest expense	(891)		(864)		(1,774)		(1,435)
Other (expense) income, net	(35)		(162)		380		(54)
Net loss before tax	(15,242)		(16,055)		(28,805)		(31,791)
Income tax expense	84		140		270		264
Net loss	(15,326)		(16,195)		(29,075)		(32,055)
Other comprehensive income (loss)
Currency translation adjustment	40		170		(509)		242
Change in unrealized (losses) gains on marketable securities	(30)		(34)		(158)		139
Total other comprehensive income (loss)	10		136		(667)		381
Comprehensive loss	$	(15,316)	$	(16,059)	$	(29,742)	$	(31,674)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.39)	$	(0.43)	$	(0.75)	$	(0.85)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	38,943,066		37,818,256		38,789,548		37,696,001

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

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Pulmonx Corporation

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Amount
Balances at January 1, 2024	38,516,383	$	39	$	526,797	$	2,640	$	(411,161)	$	118,315
Issuance of common stock upon vesting of restricted stock units	177,610	—		—		—		—		—
Issuance of common stock upon exercise of stock options	28,116	—		57		—		—		57
Issuance of shares pursuant to employee stock purchase plan	90,066	—		808		—		—		808
Stock-based compensation expense	—	—		5,744		—		—		5,744
Currency translation adjustment	—	—		—		(549)		—		(549)
Change in unrealized losses on marketable securities	—	—		—		(128)		—		(128)
Net loss	—	—		—		—		(13,749)		(13,749)
Balances at March 31, 2024	38,812,175	39		533,406		1,963		(424,910)		110,498
Issuance of common stock upon vesting of restricted stock units	328,336	—		—		—		—		—
Issuance of common stock upon exercise of stock options	11,350	—		22		—		—		22
Stock-based compensation expense	—	—		5,980		—		—		5,980
Currency translation adjustment	—	—		—		40		—		40
Change in unrealized losses on marketable securities	—	—		—		(30)		—		(30)
Net loss	—	—		—		—		(15,326)		(15,326)
Balances at June 30, 2024	39,151,861	$	39	$	539,408	$	1,973	$	(440,236)	$	101,184

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	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Amount
Balances at January 1, 2023	37,555,565	$	38	$	502,712	$	1,575	$	(350,318)	$	154,007
Issuance of common stock upon vesting of restricted stock units	66,895	—		—		—		—		—
Issuance of common stock upon exercise of stock options	23,006	—		46		—		—		46
Issuance of shares pursuant to employee stock purchase plan	85,210	—		676		—		—		676
Change in shares subject to repurchase	—	—		56		—		—		56
Stock-based compensation expense	—	—		4,764		—		—		4,764
Currency translation adjustment	—	—		—		72		—		72
Change in unrealized gains on marketable securities	—	—		—		173		—		173
Net loss	—	—		—		—		(15,860)		(15,860)
Balances at March 31, 2023	37,730,676	38		508,254		1,820		(366,178)		143,934
Issuance of common stock upon vesting of restricted stock units	222,598	—		—		—		—		—
Issuance of common stock upon exercise of stock options	63,503	—		139		—		—		139
Change in shares subject to repurchase	—	—		47		—		—		47
Repurchase of early exercised common stock options	(106)	—		—		—		—		—
Stock-based compensation expense	—	—		5,891		—		—		5,891
Currency translation adjustment	—	—		—		170		—		170
Change in unrealized losses on marketable securities	—	—		—		(34)		—		(34)
Net loss	—	—		—		—		(16,195)		(16,195)
Balances at June 30, 2023	38,016,671	$	38	$	514,331	$	1,956	$	(382,373)	$	133,952

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

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Pulmonx Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities
Net loss	$	(29,075)	$	(32,055)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense	11,593		10,500
Loss on disposal of fixed assets	—		1
Impairment of capitalized software development costs	1,717		—
Change in allowance for credit losses	40		(1)
Inventory write-downs	284		380
Depreciation and amortization expense	823		846
Amortization of debt discount and debt issuance costs	30		22
Net accretion of discounts on marketable securities	(871)		(437)
Non-cash lease expense	1,211		1,324
Net changes in operating assets and liabilities:
Accounts receivable	792		(184)
Inventory	(672)		(267)
Prepaid expenses and other current assets	622		25
Other assets	66		17
Accounts payable	1,630		350
Accrued liabilities	(4,246)		501
Income taxes payable	(22)		19
Lease liabilities	(1,492)		(1,550)
Deferred revenue	5		(26)
Net cash used in operating activities	(17,565)		(20,535)
Cash flows from investing activities
Purchases of investments	(20,837)		(25,624)
Maturities of investments	18,415		25,500
Purchases of property and equipment and internal software development costs	(920)		(115)
Net cash used in investing activities	(3,342)		(239)
Cash flows from financing activities
Proceeds from borrowing under term loan	—		20,000
Repayment of credit agreement	(46)		(47)
Proceeds from exercise of common stock options	80		183
Proceeds from issuance of common stock under the employee stock purchase plan	808		676
Net cash provided by financing activities	842		20,812
Effect of exchange rate changes on cash and cash equivalents	2		42
Net (decrease) increase in cash, cash equivalents, and restricted cash	(20,063)		80
Cash, cash equivalents, and restricted cash at beginning of the period	83,784		101,967
Cash, cash equivalents, and restricted cash at end of the period	$	63,721	$	102,047
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets:
Cash and cash equivalents	$	63,464	$	101,581
Restricted cash	257		466
Cash, cash equivalents, and restricted cash in consolidated balance sheets	$	63,721	$	102,047

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Supplemental non-cash items:
Lapse in repurchase rights of common stock	$	—	$	103
Purchases of property and equipment in accounts payable and accrued liabilities	$	169	$	450
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	276	$	206
Cash paid for interest	$	1,778	$	1,235

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

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Pulmonx Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

1. Formation and Business of the Company

The Company

Pulmonx Corporation (the “Company”) was incorporated in the state of California in December 1995 as Pulmonx and reincorporated in the state of Delaware in December 2013. The Company is a commercial-stage medical technology company that provides a minimally invasive treatment for patients with severe emphysema, a form of chronic obstructive pulmonary disease (“COPD”). The Company’s solution, which is comprised of the Zephyr Endobronchial Valve (“Zephyr Valve”), the Chartis Pulmonary Assessment System (“Chartis System”) and the StratX Lung Analysis Platform (“StratX Platform”, which is called the LungTraX Platform in the United States), is designed to treat a broad pool of patients for whom medical management has reached its limits and either do not want or are ineligible for surgical approaches. The Company has subsidiaries in Germany, Switzerland, Australia, the United Kingdom, Italy, France, Hong Kong and Japan.

Liquidity and Going Concern

The Company has incurred operating losses and negative cash flows from operations to date and has an accumulated deficit of $440.2 million as of June 30, 2024. During the six months ended June 30, 2024 and June 30, 2023, the Company used $17.6 million and $20.5 million of cash in its operating activities, respectively. As of June 30, 2024, the Company had cash, cash equivalents and marketable securities of $114.5 million. Historically, the Company’s activities have been financed through the sale of equity securities, debt financing arrangements and sales of its products.

The Company’s unaudited interim condensed consolidated financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months. Management believes that the Company’s existing cash, cash equivalents and marketable securities will allow the Company to continue its planned operations for at least the next 12 months from the date of the issuance of these unaudited interim condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Principles of Consolidation

The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The condensed consolidated balance sheet as of December 31, 2023 was derived from the Company’s audited financial statements, but does not include all disclosures required by U.S. GAAP. The accompanying unaudited interim condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and June 30, 2023, 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 financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. Accordingly, these financial statements should be read in

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Pulmonx Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

conjunction with the audited financial statements as of and for the fiscal year ended December 31, 2023 and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 27, 2024. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2024 and condensed consolidated results of operations for the three and six months ended June 30, 2024 and June 30, 2023 and condensed consolidated cash flows for the six months ended June 30, 2024 and June 30, 2023 have been made. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results of operations that may be expected for the fiscal year ending December 31, 2024.

Use of Estimates

The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Significant estimates and assumptions include reserves and write-downs related to inventories, classification of short-term and long-term inventories, the recoverability of long-term assets, stock-based compensation, intangible assets, goodwill, deferred tax assets and related valuation allowances and impact of contingencies.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments consisting of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities. Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the term loan approximates their fair value. The fair value of marketable debt securities is estimated using Level 1 and Level 2 inputs (Note 4).

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of risk consist principally of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents balances with established financial institutions and, at times, such balances with any one financial institution may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limits. As of June 30, 2024 and December 31, 2023, the Company also had cash on deposit with foreign banks of approximately $5.7 million and $4.7 million, respectively, that was not federally insured.

The Company earns revenue primarily from the sale of its products to hospitals and other customers such as distributors. Sales of Zephyr Valves and delivery catheters accounted for most of the Company’s revenue for the six months ended June 30, 2024 and June 30, 2023. The Company’s accounts receivable are derived from revenue earned from customers. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers. As of June 30, 2024 and December 31, 2023, no customer accounted for more than 10% of accounts receivable. For the three and six months ended June 30, 2024 and June 30, 2023, no customer accounted for more than 10% of revenue.

The Company relies on single source suppliers for the components, sub-assemblies and materials for its products. These components, sub-assemblies and materials are critical and there are no or relatively few alternative sources of supply. The Company’s suppliers have generally met the Company’s demand for their products and services on a timely basis in the past.

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Pulmonx Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

Foreign Currency Translation and Transaction Gains and Losses

The functional currencies of the Company’s wholly owned subsidiaries in Switzerland, Germany, Australia, the United Kingdom, France and Hong Kong are the Swiss franc. The functional currency of the Company’s subsidiaries in Italy and Japan is the Euro and Yen, respectively. Accordingly, asset and liability accounts of Switzerland, France, Germany, Australia, the United Kingdom, Italy, Hong Kong and Japan operations are translated into U.S. dollars using the current exchange rate in effect at the balance sheet date and equity accounts are translated into U.S. dollars using historical rates. The revenues and expenses are translated using the average exchange rates in effect during the period, and gains and losses from foreign currency translation adjustments are included as a component of accumulated other comprehensive income in the condensed consolidated balance sheet. Foreign currency translation adjustments are recorded in other comprehensive income (loss) in the condensed consolidated statements of operations and comprehensive loss and was less than $0.1 million and $0.2 million during the three months ended June 30, 2024 and June 30, 2023, respectively, and $(0.5) million and $0.2 million during the six months ended June 30, 2024 and June 30, 2023, respectively.

Foreign currency transaction gains and losses are included in other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss and was less than $(0.1) million and $(0.2) million during the three months ended June 30, 2024 and June 30, 2023, respectively, and $0.3 million and $(0.2) million during the six months ended June 30, 2024 and June 30, 2023, respectively.

Credit Losses—Accounts Receivable

Accounts receivable are recorded at the amounts billed less estimated allowances for credit losses for any potential uncollectible amounts. The Company continually monitors customer payments and maintains an allowance for estimated losses resulting from a customer’s inability to make required payments. The Company considers factors such as historical experience, credit quality, age of the accounts receivable balances, geographic related risks and economic conditions that may affect a customer’s ability to pay. Accounts receivable are written-off and charged against an allowance for credit losses when the Company has exhausted collection efforts without success. As of June 30, 2024 and December 31, 2023, accounts receivable is presented net of an allowance for credit losses of less than $0.1 million and $0, respectively.

Net Loss per Share Attributable to Common Stockholders

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options and common stock subject to repurchase related to early exercise of stock options are considered to be potentially dilutive securities. Basic and diluted net loss attributable to common stockholders per share is presented in conformity with the two-class method required for participating securities. The Company considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of the shares issued upon early exercise of stock options subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

3. Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of

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significant segment expenses that are regularly provided to the chief operating decision maker (CODM), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that this update will have on its disclosures in the consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the disclosure requirements related to the new standard.

All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

4. Fair Value Measurements

Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis—Financial assets and liabilities held by the Company measured at fair value on a recurring basis include money market funds and marketable securities.

Assets and Liabilities Measured and Recorded at Fair Value on a Nonrecurring Basis—The Company determines the fair value of long-lived assets held and used, such as intangible assets, by reference to independent appraisals, quoted market prices (e.g., an offer to purchase) and other factors. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. There have been no impairment charges recorded to date. Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the term loan approximates the fair value. The fair value of the term loan is estimated using Level 2 inputs.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the

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fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The following tables summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


	June 30, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	6,191	$	—	$	—	$	6,191
Total cash equivalents	$	6,191	$	—	$	—	$	6,191
Marketable securities:
U.S. Government agency bonds	$	8,565	$	19,686	$	—	$	28,251
Corporate debt securities	—		2,929		—		2,929
Commercial paper	—		19,901		—		19,901
Total marketable securities	8,565		42,516		—		51,081
Total financial assets	$	14,756	$	42,516	$	—	$	57,272


	December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	25,129	$	—	$	—	$	25,129
Total cash equivalents	$	25,129	$	—	$	—	$	25,129
Marketable securities:
U.S. Government agency bonds	$	5,798	$	29,466	$	—	$	35,264
Commercial paper	—		12,681		—		12,681
Total marketable securities	5,798		42,147		—		47,945
Total financial assets	$	30,927	$	42,147	$	—	$	73,074

There were no liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2024 and December 31, 2023.

The following table summarizes the cost, unrealized gains and losses and fair value of marketable securities (in thousands):


	June 30, 2024
	Amortized Cost		Unrealized Losses		Unrealized Gains		Fair Value
U.S. Government agency bonds	$	28,304	$	(53)	$	—	$	28,251
Corporate debt securities	2,932		(3)		—		2,929
Commercial paper	19,918		(19)		2		19,901
Total	$	51,154	$	(75)	$	2	$	51,081

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	December 31, 2023
	Amortized Cost		Unrealized Losses		Unrealized Gains		Fair Value
U.S. Government agency bonds	$	35,194	$	(26)	$	96	$	35,264
Commercial paper	12,667		(1)		15		12,681
Total	$	47,861	$	(27)	$	111	$	47,945

The following table summarizes the marketable securities with unrealized losses as of June 30, 2024 and December 31, 2023, aggregated by major security type and the length of time that individual securities have been in a continuous loss position (in thousands):


	June 30, 2024
	Less than 12 months				12 months or greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government agency bonds	$	25,260	$	(42)	$	2,991	$	(11)	$	28,251	$	(53)
Corporate debt securities	2,929		(3)		—		—		2,929		(3)
Commercial paper	11,219		(19)		—		—		11,219		(19)
Total	$	39,408	$	(64)	$	2,991	$	(11)	$	42,399	$	(75)


	December 31, 2023
	Less than 12 months				12 months or greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government agency bonds	$	11,888	$	(23)	$	1,745	$	(3)	$	13,633	$	(26)
Commercial paper	996		(1)		—		—		996		(1)
Total	$	12,884	$	(24)	$	1,745	$	(3)	$	14,629	$	(27)

The unrealized losses for marketable securities relate to changes in interest rates. No allowance for credit losses was recorded as of June 30, 2024 and December 31, 2023, and no impairment losses were recognized for the three and six months ended June 30, 2024 and June 30, 2023.

Accrued interest receivable on marketable securities of $0.2 million and $0.4 million as of June 30, 2024 and December 31, 2023, respectively, is included in prepaid expenses and other current assets on the condensed consolidated balance sheet. The Company elected to exclude accrued interest receivable from the estimation of expected credit losses on its marketable securities and reverse accrued interest receivable through interest income (expense) when amounts are determined to be uncollectible. The Company did not write off any accrued interest receivable during the three and six months ended June 30, 2024 and June 30, 2023.

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Contractual Maturities

The following table summarizes the contractual maturities of the Company’s marketable securities (in thousands):


	June 30, 2024
	Amortized Cost		Fair Value
Due within one year	$	51,154	$	51,081
Due in one year to five years	—		—
Total	$	51,154	$	51,081

5. Balance Sheet Components

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of the following (in thousands):


	June 30,		December 31,
	2024		2023
Cash	$	57,273	$	58,418
Cash equivalents:
Money market funds	6,191		25,129
Total cash and cash equivalents	$	63,464	$	83,547

Inventory

Inventory consists of the following (in thousands):


	June 30,		December 31,
	2024		2023
Raw materials	$	3,032	$	2,924
Work in process	387		427
Finished goods	15,861		15,972
Total inventory	$	19,280	$	19,323
Reported as:
Inventory	$	16,980	$	16,743
Long-term inventory	2,300		2,580
Total inventory	$	19,280	$	19,323

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Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):


	June 30,		December 31,
	2024		2023
Prepaid expenses	$	1,996	$	1,910
Prepaid insurance	424		906
VAT and other receivable	700		915
Other current assets	177		504
Total prepaid expenses and other current assets	$	3,297	$	4,235

Capitalized Implementation Costs of a Hosting Arrangement

The Company has several software systems that are cloud-based hosting arrangements with service contracts. The Company accounts for costs incurred in connection with the implementation of these various software systems under ASU 2018-15, Intangibles—Goodwill and Other—Internal Use Software (Subtopic 350–40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The Company expenses all costs (internal and external) that are incurred in the planning and post-implementation operation stages. As of June 30, 2024 and December 31, 2023, the Company has capitalized less than $0.1 million and $0.1 million in implementation costs, net of amortization, respectively. The capitalized costs are amortized on a straight-line basis over the non-cancelable contract terms, which are generally three years. As of June 30, 2024, the capitalized costs of less than $0.1 million were included in prepaid expenses and other current assets. Amortization expense, which was included in selling, general and administrative expenses, was less than $0.1 million and $0.1 million for the three months ended June 30, 2024 and June 30, 2023, respectively, and $0.1 million and $0.2 million for the six months ended June 30, 2024 and June 30, 2023, respectively.

Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):


	June 30,		December 31,
	2024		2023
Machinery and equipment	$	2,352	$	2,271
Computer equipment and software	2,476		1,872
Furniture and fixtures	295		264
Leasehold improvements	2,277		2,277
Construction in progress	1,002		2,199
Total	8,402		8,883
Less: accumulated depreciation	(5,572)		(4,855)
Property and equipment, net	$	2,830	$	4,028

In the second quarter of 2024, the Company recorded a non-cash impairment charge of $1.7 million related to certain previously capitalized software development costs that reduced the carrying value of those assets to zero. The impairment charge was recorded in research and development expenses on the Company’s condensed consolidated statements of operations and comprehensive loss. This impairment charge was primarily driven by the Company’s strategic decision to adopt a more cost-efficient solution in place of completing the development of the internally developed software.

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Depreciation expense was $0.3 million for each of the three months ended June 30, 2024 and June 30, 2023. Depreciation expense was $0.7 million for each of the six months ended June 30, 2024 and June 30, 2023.

Goodwill

Goodwill was $2.3 million as of June 30, 2024 and December 31, 2023. There were no acquisitions or dispositions of goodwill in the six months ended June 30, 2024 and June 30, 2023. The Company assesses goodwill for impairment annually, or more frequently, when events or changes in circumstances indicate there may be impairment. Through June 30, 2024, there have been no events or changes in circumstances that indicated that the carrying value of goodwill may not be recoverable. As a result, no impairment charge was recorded during the six months ended June 30, 2024.

Intangible Assets

Amortization expense relating to intangibles was $0 and less than $0.1 million during each of the three months ended June 30, 2024 and June 30, 2023, respectively. Amortization expense relating to intangibles was less than $0.1 million and $0.1 million during each of the six months ended June 30, 2024 and June 30, 2023, respectively. The intangible assets were fully amortized as of June 30, 2024.

Intangible assets as of December 31, 2023 consist of the following (in thousands):


	December 31, 2023
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Developed technology	$	1,658	$	(1,630)	$	28
Trademarks	191		(188)		3
Total intangible assets	$	1,849	$	(1,818)	$	31

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


	June 30,		December 31,
	2024		2023
Accrued employee bonuses and commissions	$	3,682	$	7,875
Accrued vacation	2,579		2,400
Other accrued personnel related expenses	2,298		2,859
Accrued professional fees	2,003		1,705
Sales taxes, franchise tax and VAT	772		763
Other	449		632
Total accrued liabilities	$	11,783	$	16,234

6. Long Term Debt

CIBC Loan

On February 20, 2020, the Company executed a Loan and Security Agreement with Canadian Imperial Bank of Commerce (“CIBC”), which the Company subsequently amended on April 17, 2020 and December 28, 2020 (as amended, the “CIBC Agreement”). The CIBC Agreement originally provided the Company with the ability to borrow up to $32.0 million in debt financing (“CIBC Loan”) consisting of $17.0 million advanced at the closing of

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the agreement (“Tranche A”), with the option to draw up to an additional $8.0 million (“Tranche B”) and an additional financing tranche (“Tranche C”) of up to $7.0 million on or prior to February 20, 2022. Neither Tranche B nor Tranche C was drawn before the option expired.

The CIBC Loan originally had a five-year term maturing on February 20, 2025, which included 24 months of interest only payments followed by 36 months of equal payments of principal and interest.

In April 2020, the Company entered into a First Amendment to CIBC Agreement that changed the maturity date to March 15, 2022, which would be automatically extended to February 20, 2025 if the maturity of all outstanding convertible notes was extended to a date no earlier than May 21, 2025 or all convertible notes converted into convertible preferred stock of the Company. An amendment fee of $0.2 million was paid. The amendment was accounted for as a debt modification and no gain or loss was recognized.

In December 2020, to address certain post-close covenants for which the Company was not in compliance, the Company entered into a Second Amendment to the CIBC Agreement that extended the compliance of such covenants to June 30, 2021.

In March 2021, the Company entered into an Amended and Restated Loan and Security Agreement with CIBC (as amended, the “Amended and Restated CIBC Agreement”) which, among other things, extended the loan maturity date of the CIBC Loan from March 15, 2022 to February 20, 2025, and modified certain financial covenants. Per the amended terms, 36 equal payments of principal plus accrued interest would be due beginning March 31, 2022. In connection with the Amended and Restated CIBC Agreement, the Company paid fees to CIBC of less than $0.1 million which were recorded as a discount on the CIBC Loan and are being accreted over the life of the term loan using the effective interest method. The amendment was accounted for as a debt modification and no gain or loss was recognized.

In June 2021, the Company entered into a First Amendment to the Amended and Restated CIBC Agreement that extended the compliance of certain post-close covenants to March 31, 2022.

In October 2021, the Company entered into a Second Amendment to the Amended and Restated CIBC Agreement, which extended the interest only period of the loan from 24 months to 36 months. Under the amended terms, principal repayment would begin in February 2023. There was no change to the loan interest rate or maturity date.

In October 2022, the Company entered into a Third Amendment to the Amended and Restated CIBC Agreement (the “Third Amendment”) with CIBC, which amended certain provisions of the CIBC Loan. The amendment provided the option to draw up to an additional $20.0 million (“Amended Tranche B”) on or prior to October 31, 2023, which can be drawn in increments of at least $5.0 million. Upon request by the Company, CIBC may, in its sole discretion, make additional term loans of up to $10.0 million (“Amended Tranche C”) at any time. The Third Amendment extended the maturity date of the CIBC Loan from February 20, 2025 to October 31, 2027 and provided for a new interest-only period of 24 months from the signing date of the Third Amendment, with the possibility of an additional extension of such interest only period of up to 12 months, subject to satisfaction of certain conditions set forth in the Third Amendment. The Company paid a commitment fee of less than $0.1 million in connection with the Third Amendment. The amendment was accounted for as a debt modification and no gain or loss was recognized.

In February 2023, the Company drew $20.0 million of the Amended Tranche B which has the same interest rate and repayment terms as Tranche A of the CIBC Loan.

In May 2024, as a result of the Company satisfying certain conditions set forth in the Third Amendment, the Company extended the interest-only period of the CIBC Loan from 24 months to 36 months. Principal repayment will begin in November 2025. There was no change to the loan interest rate, maturity date, or other terms of the loan.

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Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

Upon draw of the Amended Tranche B, the financial covenants in the Amended and Restated CIBC Agreement require that, when the cash and cash equivalents of the Company as defined in the Amended and Restated CIBC Agreement is less than $100.0 million, the Company have revenue for the trailing three-month period ending on the last day of each fiscal quarter of not less than 80.0% of the revenue for the trailing three-month period, as set forth in the annual projections delivered to the CIBC. Further, the Company is required to maintain unrestricted cash in an aggregate amount equal to the greater of $20.0 million and the Adjusted EBITDA loss as defined in the Amended and Restated CIBC Agreement for the six-month period ending on any date of determination. As of June 30, 2024, the Company was in compliance with all covenants contained in Amended and Restated CIBC Agreement.

The CIBC Loan bears interest at a floating rate equal to 1.0% above the Wall Street Journal Prime Rate at any time. The CIBC Loan is collateralized by substantially all of the Company’s assets, including cash and cash equivalents, accounts receivable, intellectual property and equipment. The Company may prepay the borrowings under the Amended and Restated CIBC Agreement, subject to certain conditions, including a prepayment fee equal to 2.0% of the principal amount repaid during the first year after the effective date of the Third Amendment or 1.0% of the principal amount prepaid during the second year after the effective date of the Third Amendment.

As of June 30, 2024, the CIBC Loan had an annual effective interest rate of 10.1% per year.

The CIBC Loan consists of the following (in thousands):


	June 30,		December 31,
	2024		2023
Term loan	$	37,000	$	37,000
Less: debt issuance costs	(121)		(152)
Term loan	$	36,879	$	36,848
Reported as:
Short-term debt	$	—	$	2,056
Long-term debt	36,879		34,792
Total term loan	$	36,879	$	36,848

The Company paid $0.5 million fees to the lender and third parties which is reflected as a discount on the CIBC Loan and is being accreted over the life of the term loan using the effective interest method.

During the three months ended June 30, 2024 and June 30, 2023, the Company recorded interest expense related to debt discount and debt issuance costs of the CIBC Loan of less than $0.1 million and less than $0.1 million, respectively. During the six months ended June 30, 2024 and June 30, 2023, the Company recorded interest expense related to debt discount and debt issuance costs of the CIBC Loan of less than $0.1 million and less than $0.1 million, respectively.

Interest expense on the CIBC Loan was $0.9 million during each of the three months ended June 30, 2024 and June 30, 2023. Interest expense on the CIBC Loan was $1.8 million and $1.4 million during the six months ended June 30, 2024 and June 30, 2023, respectively.

Credit Agreement

In May 2020, Pulmonx International Sàrl, a wholly owned subsidiary of the Company, received 0.5 million Swiss Francs ($0.5 million U.S. dollar equivalent) from a COVID-19 Credit Agreement under a Swiss Federal Government program designed to mitigate the economic impact of the spread of the coronavirus. The COVID-19 Credit Agreement bore no interest through March 31, 2023. Beginning April 1, 2023, the COVID-19 Credit Agreement bears interest at a rate of 1.5% per year, payable at the end of each calendar quarter. The loan principal is being repaid in twelve equal installments, paid semi-annually, which began in March of 2022. Interest expense was

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immaterial during the three and six months ended June 30, 2024 and June 30, 2023. As of June 30, 2024, Pulmonx International Sàrl has repaid $0.2 million to the lender.

Contractual Maturities of Financing Obligations

As of June 30, 2024, the aggregate future payments under the CIBC Loan and Credit Agreement (including interest payments) are as follows (in thousands):


Fiscal Year Ending December 31,	Amount
2024 (remaining six months)	$	1,821
2025	6,675
2026	21,005
2027	16,177
Total	45,678
Less: unamortized debt discount	(121)
Less: interest	(8,354)
Term loan and credit agreement	$	37,203

7. Revenue Recognition

The Company’s contract liabilities consist of deferred revenue for remaining performance obligations by the Company to the customer after delivery, which was $0.1 million and $0.1 million as of June 30, 2024 and December 31, 2023, respectively. The deferred revenue as of December 31, 2023 of $0.1 million was recognized as revenue during the six months ended June 30, 2024. The deferred revenue as of December 31, 2022 of $0.1 million was recognized as revenue during the six months ended June 30, 2023.

The Company disaggregates its revenue by major geographic region, which has been disclosed in Note 12, “Segment Information.”

8. Commitments and Contingencies

Leases

The Company has a lease for its headquarters location in Redwood City, California, which consists of approximately 24,591 square feet of office space (the “existing premises”) and was scheduled to expire on July 31, 2025 (the “Office Lease”). The Company leases additional facilities in Redwood City, California, under a sublease agreement, which consist of approximately 25,254 square feet of office space (the “expansion premises”) and was scheduled to expire on September 30, 2024 (the “Sublease”).

In May 2024, the Company entered into a third amendment to Sublease (the “Third Amendment to Sublease”) to extend the lease term of the expansion premises through May 31, 2028. The Third Amendment to Sublease contains a rent-free period between November 1, 2024 and February 28, 2025, after which rent is approximately $0.1 million per month and is subject to an annual increase of approximately 3%.

The Company also entered into a third amendment to Office Lease (the “Third Amendment to Office Lease”) to extend the lease term of the existing premises through July 31, 2035. The Third Amendment to Office Lease contains a rent-free period between August 1, 2025 and November 30, 2025, after which rent is approximately $0.1 million per month and is subject to an annual increase of approximately 3.5%. Additionally, under the Third Amendment to Office Lease, the Company and the landlord have agreed to expand the existing premises to include the expansion premises, effective as of June 1, 2028, through July 31, 2035 (conterminous with the existing

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premises as referenced above). Commencing on June 1, 2028, the monthly base rent for the expansion premises will be $0.1 million per month and is subject to an annual increase of approximately 3.5%.

Under the Third Amendment to Office Lease, the Company has two options to extend the lease term on the leased premises for a period of five years, respectively. The Company did not include the renewal options in the lease terms for calculating lease liability, as it was not reasonably certain that the Company will exercise these renewal options. The amendments were accounted for as modifications that resulted in additional right of use assets in exchange for lease liabilities of $16.3 million.

In 2013, the Company entered into a five-year lease for office facilities in Switzerland. The Company had an option to extend the lease through January 2022, which was not exercised by the Company. Per the lease terms, in the event the option to extend is not exercised, the lease remains in force and can be terminated with 12-months’ notice. In June 2024, with the intention of seeking other premises, the Company provided notice to the landlord to terminate the lease, effective June 30, 2025.

As of June 30, 2024, the Company has leases on fourteen vehicles with an average lease term of 3.0 years.

Operating lease cost consists of the following (in thousands):


	Six Months Ended June 30,
	2024		2023
Operating lease cost	$	1,538	$	1,442
Short-term lease cost	20		18
Variable lease cost	387		320
Total lease cost	$	1,945	$	1,780

The following table summarizes a maturity analysis of the Company’s lease liabilities showing the aggregate lease payments as of June 30, 2024 (in thousands):


Fiscal Year Ending December 31,	Amount
2024 (remaining six months)	$	1,573
2025	2,176
2026	2,569
2027	2,611
2028	2,729
Thereafter	20,624
Total minimum lease payments	32,282
Less: Amount of lease payments representing interest	13,297
Present value of future minimum lease payments	$	18,985
Less: Current lease liabilities	1,071
Long-term lease liabilities	$	17,914

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Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes additional information related to the Company’s operating leases (in thousands, except weighted average data):


	June 30,			December 31,
	2024			2023
Right of use asset	$	18,490		$	3,406
Weighted average remaining lease term (years)	10.99			1.35
Weighted average discount rate	10.5		%	6.7		%

The following table summarizes other supplemental information related to the Company’s operating leases (in thousands):


	Six Months Ended June 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities included in cash flows used in operating activities	$	1,821	$	1,748
Right-of-use assets obtained in exchange for lease liabilities	$	16,360	$	224

Service Agreement

In April 2022, the Company entered into an agreement with a service provider which requires total minimum purchases of $0.6 million, $0.4 million, and $0.4 million over a three-year period. From inception of the agreement through June 30, 2024, the Company recorded $1.2 million of expense for services related to this agreement in cost of goods sold. In June 2024, the Company amended the agreement with the service provider, which eliminated the minimum purchase obligations.

Contingencies

From time to time, the Company may be a party to various litigation claims in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with legal counsel, the need to record a liability for litigation and contingencies. Accrual estimates are recorded when and if it is determinable that such a liability for litigation and contingencies are both probable and reasonably estimable.

In December 2022, the Company received a civil investigative demand (“CID”) from the U.S. Department of Justice, Civil Division in connection with an investigation under the Anti-Kickback Statute and False Claims Act (the “Investigation”). The CID requests information and documents regarding the Company’s relationships with certain health care providers, medical practices, and hospitals in connection with the sales and marketing of the Zephyr Valves and related products and services. The Company is fully cooperating with the Investigation. The Company is unable to express a view at this time regarding the ultimate outcome of the Investigation or estimate an amount or range of reasonably possible loss. Depending on the outcome of the Investigation, there could be a material impact on the Company’s business, results of operations and financial condition.

9. Income Taxes

The income tax expense for the three months ended June 30, 2024 and June 30, 2023 was $0.1 million and $0.1 million, respectively. The income tax expense for the six months ended June 30, 2024 and June 30, 2023 was $0.3 million and $0.3 million, respectively. The income tax expense was determined based upon estimates of the Company’s effective income tax rates in various jurisdictions. The difference between the Company’s effective

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Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

income tax rate and the U.S. federal statutory rate is primarily attributable to state income taxes, foreign income taxes, and non-recognition of US tax benefit because of a full valuation allowance against US deferred tax assets.

The income tax expense for the six months ended June 30, 2024 and June 30, 2023 relates primarily to state minimum income tax and income tax on the Company’s earnings in foreign jurisdictions.

10. Stockholders’ Equity

Common Stock

As of June 30, 2024 and December 31, 2023, the Company’s certificate of incorporation authorized the Company to issue up to 200,000,000 shares of common stock. Common stockholders are entitled to dividends as and when declared by the Company’s board of directors, subject to the rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no dividends declared to date. The holder of each share of common stock is entitled to one vote.

In March and May 2024, the Company granted stock-based awards outside of the existing stock plans to its new Chief Executive Officer and new Chief Financial Officer, respectively. These awards were granted as a material inducement for accepting employment with the Company, in accordance with Nasdaq Listing Rule 5635(c)(4). The inducement awards consisted of a total of 997,681 shares of the Company’s common stock, which includes an aggregate of 331,156 shares of common stock issuable upon the vesting of restricted stock unit awards and 666,525 shares of common stock issuable upon the exercise of nonqualified stock option grants generally subject to the same terms and conditions as grants that are made under the 2020 Equity Incentive Plan.

Shares Reserved for Future Issuance

The Company has reserved shares of common stock for future issuances as follows:


	June 30,	December 31,
	2024	2023
Common stock options issued and outstanding	3,766,402	3,142,981
Common stock restricted stock units issued and outstanding	3,197,736	2,244,903
Common stock available for future grants	2,951,051	2,541,438
Common stock available for employee stock purchase plan	1,731,920	1,436,823
Total	11,647,109	9,366,145

Stock Option Plan

A summary of stock option activity for the existing stock plans and the inducement awards for the six months ended June 30, 2024 is set forth below:


	Outstanding Options
	Number of Shares	Weighted Average Exercise Price
Balance, January 1, 2024	3,142,981	$	16.40
Options granted	895,125	9.09
Options exercised	(39,466)	2.02
Options canceled	(232,238)	21.85
Balance, June 30, 2024	3,766,402	$	14.48

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Pulmonx Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

The aggregate intrinsic value of options outstanding as of June 30, 2024 was $3.7 million.


	June 30, 2024
	Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Life (in Years)
Options vested and exercisable	1,954,036	$	15.32	6.45
Options vested and expected to vest	3,766,402	$	14.48	7.64

Total aggregate intrinsic value of options vested and exercisable as of June 30, 2024 was $3.5 million.

Restricted Stock Units

A summary of restricted stock units activity for the existing stock plans and the inducement awards for the six months ended June 30, 2024 is set forth below:


	Number of Shares Underlying Outstanding Restricted Stock	Weighted Average Grant Date Fair Value
Unvested, January 1, 2024	2,244,903	$	15.74
Granted	1,705,208	8.89
Vested	(505,946)	16.10
Canceled	(246,429)	14.75
Unvested, June 30, 2024	3,197,736	$	12.11

The aggregate intrinsic value of restricted stock units outstanding as of June 30, 2024 was $20.3 million.

The fair value as of the respective vesting dates of restricted stock units that vested during the three months ended June 30, 2024 and June 30, 2023 was $2.6 million and $2.7 million, respectively. The fair value as of the respective vesting dates of restricted stock units that vested during the six months ended June 30, 2024 and June 30, 2023 was $4.2 million and $3.5 million, respectively.

Total Stock-Based Compensation

Stock-based compensation expense is reflected in the statements of operations and comprehensive loss as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cost of goods sold	$	435	$	391	$	816	$	614
Research and development	714		760		1,487		1,326
Selling, general and administrative	4,771		4,711		9,290		8,560
Total	$	5,920	$	5,862	$	11,593	$	10,500

The above stock-based compensation expense related to the following equity-based awards (in thousands):

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Pulmonx Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Stock options and restricted stock units	$	5,818	$	5,799	$	11,299	$	10,339
Employee stock purchase plan	102		63		294		161
Total	$	5,920	$	5,862	$	11,593	$	10,500

Stock-based compensation of $0.5 million and $0.4 million was capitalized into inventory for the three months ended June 30, 2024 and June 30, 2023, respectively. Stock-based compensation of $0.9 million and $0.8 million was capitalized into inventory for the six months ended June 30, 2024 and June 30, 2023, respectively. Stock-based compensation capitalized in prior periods of $0.4 million and $0.4 million was recognized as cost of sales in the three months ended June 30, 2024 and June 30, 2023, respectively. Stock-based compensation capitalized in prior periods of $0.8 million and $0.6 million was recognized as cost of sales in the six months ended June 30, 2024 and June 30, 2023, respectively.

As of June 30, 2024, there was $50.6 million of unrecognized compensation costs related to unvested common stock options and restricted stock units, expected to be recognized over a weighted-average period of 2.7 years.

As of June 30, 2024, the Company had unrecognized stock-based compensation relating to the employee stock purchase plan of less than $0.1 million, which is expected to be recognized over a weighted-average period of 0.1 years.

Stock Modification

In February 2024, the Company’s former Chief Executive Officer, Glendon French, resigned as President and Chief Executive Officer, effective as of March 15, 2024. Following this date, Mr. French continued as a full-time employee of the Company in the capacity of Senior Advisor to the new President and Chief Executive Officer until May 1, 2024, when his employment ceased. Thereafter, Mr. French has continued to serve as a member of the Company’s board of directors, and his outstanding equity awards have continued to vest in accordance with their terms, subject to his continued service to the Company as a member of the board of directors.

The Company evaluated the change in status in accordance with ASC 718 and determined that there was a modification to the unvested awards expected to vest after March 15, 2024. The total stock-based compensation expense related to the modification, evaluated as of the modification date, was $6.3 million, to be recognized over the remaining vesting periods. The Company recorded $0.7 million and $1.1 million in stock-based compensation expenses related to the modification for the three and six months ended June 30, 2024.

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Pulmonx Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

11. Net Loss per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders which excludes shares which are legally outstanding, but subject to repurchase by the Company (in thousands, except share and per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator
Net loss attributable to common stockholders	$	(15,326)	$	(16,195)	$	(29,075)	$	(32,055)
Denominator
Weighted-average common stock outstanding	38,943,110		37,846,019		38,789,609		37,738,775
Less: weighted-average common shares subject to repurchase	(44)		(27,763)		(61)		(42,774)
Weighted-average common shares used to compute basic and diluted net loss per share	38,943,066		37,818,256		38,789,548		37,696,001
Net loss per share attributable to common stockholders, basic and diluted	$	(0.39)	$	(0.43)	$	(0.75)	$	(0.85)

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding because such securities have an antidilutive impact due to the Company’s net loss, in common stock equivalent shares:


	As of June 30
	2024	2023
Options to purchase common stock	3,766,402	3,201,912
Unvested restricted stock units	3,197,736	2,556,721
Unvested early exercised common stock options	23	20,055
Shares committed under employee stock purchase plan	51,487	49,220
Total	7,015,648	5,827,908

12. Segment Information

The chief operating decision maker for the Company is the Chief Executive Officer. The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region, for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single reportable and operating segment structure. The Company’s Chief Executive Officer evaluates performance based primarily on revenue in the geographic locations in which the Company operates.

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Pulmonx Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

Revenue by geographic area is based on the billing address of the customer. The following table sets forth the Company’s revenue by geographic area (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
United States	$	13,881	$	11,022	$	26,750	$	20,359
Europe, Middle-East and Africa (“EMEA”)	5,961		5,312		11,077		9,843
Asia Pacific	802		792		1,500		1,388
Other International	139		68		310		139
Total	$	20,783	$	17,194	$	39,637	$	31,729

Long-lived assets by geographic area are based on physical location of those assets. The following table sets forth the Company’s long-lived assets by geographic area (in thousands):


	June 30,		December 31,
	2024		2023
United States	$	2,736	$	3,962
EMEA	45		54
Asia Pacific	49		12
Total	$	2,830	$	4,028

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions, that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections of this Quarterly Report entitled “Forward-Looking Statements” and “Risk Factors,” under Part II, Item 1A and those discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2024.

Overview

We are a commercial-stage medical technology company that provides a minimally invasive treatment for patients with severe emphysema, a form of chronic obstructive pulmonary disease (“COPD”). Our solution, which is comprised of the Zephyr Endobronchial Valve (“Zephyr Valve”), the Chartis Pulmonary Assessment System (“Chartis System”) and the StratX Lung Analysis Platform (“StratX Platform”), is designed to treat severe emphysema patients who, despite medical management, are still profoundly symptomatic and either do not want or are ineligible for surgical approaches.

In June 2018, we received pre-market approval (“PMA”) by the U.S. Food and Drug Administration (“FDA”) as a result of our breakthrough technology designation. The Zephyr Valve is commercially available in numerous countries globally. We have established reimbursement in major markets in North America, Europe and Asia Pacific and the Zephyr Valve has been included in treatment guidelines for COPD worldwide.

We market and sell our products in the United States through a direct sales organization. Our sales territory managers are focused on promoting awareness and increasing adoption of our solution primarily among the pulmonologists performing interventional pulmonary procedures across approximately 500 high-volume hospitals in the United States. We are expanding our commercial operations in the United States while continuing to foster our international growth. We employ both direct and distributor-based sales models, with 97% of our revenue generated in markets where we sell directly for the six months ended June 30, 2024.

In the United States, our solution is reimbursed based on established Category I Current Procedural Terminology (“CPT”) and ICD-10 Procedure Coding System (“PCS”) codes and associated APC and MS-DRG payment groupings. Current reimbursement in the United States is believed to cover the hospital costs of the procedure and related inpatient care. Commercial payors such as Aetna, Humana, and many of the largest Blue Cross Blue Shield plans including Anthem, Health Care Service Corporation, and BCBS Michigan have issued positive coverage policies for the Zephyr Valve, and United Healthcare no longer considers the procedure unproven or experimental. Medicare covers our solution for patients when medically necessary, and other commercial insurers are approving prior authorization requests on a case-by-case basis. Outside the United States, our solution is covered by major health systems across much of Europe, Australia, South Korea and Japan.

We manufacture all our products at our headquarters located in Redwood City, California. This facility supports production and distribution operations, including manufacturing, quality control, raw material and finished goods storage. We have manufactured all our products at this facility for over ten years. We also store finished goods at secondary facilities. We seek to maintain higher levels of inventory to protect ourselves from supply interruptions and have an established distribution system for both U.S. and international customers.

To date, we have financed our operations primarily through the sale of equity securities, debt financing arrangements and sales of our products. We have devoted substantially all of our resources to research and development activities related to our solution, including clinical and regulatory initiatives to obtain marketing

approval, sales and marketing activities, and investing in general and administrative infrastructure. We generated revenue of $20.8 million, with a gross margin of 73.7% and a net loss of $15.3 million, for the three months ended June 30, 2024 compared to revenue of $17.2 million, with a gross margin of 74.1% and a net loss of $16.2 million, for the three months ended June 30, 2023. For the six months ended June 30, 2024, we generated revenue of $39.6 million, with a gross margin of 74.1% and a net loss of $29.1 million, compared to revenue of $31.7 million, with a gross margin of 73.5% and a net loss of $32.1 million, for the six months ended June 30, 2023. As of June 30, 2024, we had an accumulated deficit of $440.2 million, cash, cash equivalents and marketable securities of $114.5 million, and $37.2 million of outstanding term loans and credit agreements, net of debt discount and debt issuance costs.

We have invested heavily in product development. Our research and development activities have been centered on driving continuous improvements to our solution. We have also made significant investments in clinical studies to demonstrate the safety and efficacy of the Zephyr Valve and to support regulatory submissions. We intend to continue to make significant investments in our sales and marketing organization throughout the United States, Europe and Asia Pacific. We have made, and intend to continue to make, investments in research and development efforts to develop our next generation products and support our future regulatory submissions to increase our addressable market and to expand indications and new markets. Because of these and other factors, we expect to continue to incur net losses for the next several years and we expect to require substantial additional funding, which may include future equity and debt financings.

Management believes that the Company’s existing cash, cash equivalents and marketable securities will allow the Company to continue its operations for at least the next 12 months from the date of the issuance of our condensed consolidated financial statements.

Factors Affecting our Business and Results of Operations

We believe there are several important factors that have impacted and that we expect will continue to impact our business and results of operations. These factors include:

Our Ability to Recruit, Train and Retain Our Sales Force and its Productivity

We have made, and intend to continue to make, significant investments in recruiting, training and retaining our direct sales force. This process requires significant education and training for our sales personnel to achieve the level of technical competency with our products that is expected by physicians and to gain experience building demand for our products. Upon completion of the training, our sales personnel typically require time in the field to grow their network of accounts and increase their productivity to the levels we expect. Successfully recruiting, training and retaining additional sales personnel will be required to achieve growth. In addition, inability to attract qualified sales personnel or the loss of any productive sales personnel would have a negative impact on our ability to grow our business.

We have in the past and expect in the future to enter into different compensation arrangements with our sales professionals, which include minimum guaranteed commissions. This has impacted our compensation expenses in the past and we expect it will do so in the future.

Physician, Patient and Hospital Awareness and Acceptance of Our Solution

We intend to continue to promote awareness of our solution through training and educating physicians, pulmonary rehabilitation centers, key opinion leaders and various medical societies on the proven clinical benefits of Zephyr Valves. In addition, we intend to continue to publish additional clinical data in various industry and scientific journals and online and to present at various industry conferences. We plan to continue building patient awareness through our direct-to-patient marketing initiatives, which include advertising, social media and online education. We also intend to continue helping physicians in their outreach to patients and other healthcare providers. These efforts require significant investment by our marketing and sales organization, and vary depending upon the physician’s practice specialization, and personal preferences and geographic location of physicians, pulmonary rehabilitation centers and patients. In order to grow our business, we will need to continue to make significant investments in

training and educating hospitals, physicians and patients on the advantages of our solution for the treatment of severe emphysema.

Third-Party Reimbursement

Since achieving regulatory approval in the United States in June 2018, we have launched the Zephyr Valve treatment and have made progress securing third-party payor reimbursement. The majority of our patients are Medicare beneficiaries. We estimate that roughly 75% of the potential Zephyr Valve patient population are Medicare/Medicaid beneficiaries, of which approximately 30% have managed Medicare/Medicaid and the remaining 45% have traditional Medicare/Medicaid. Approximately 25% of the potential Zephyr Valve patient population is under third-party commercial payor policies. We continue to work to broaden our coverage by private third-party payor policies. Commercial payors such as Aetna, Humana, and many of the largest Blue Cross Blue Shield plans including Anthem, Health Care Service Corporation, BCBS Michigan, and Highmark have issued positive coverage policies for the Zephyr Valve, and United Healthcare no longer considers the procedure unproven or experimental. Some commercial payors do not yet consider our solution medically necessary, but these same plans are approving prior authorization requests on a case-by-case basis. Medicare, currently without a public coverage policy, covers our solution for patients when medically necessary on a case-by-case basis and other commercial insurers not described above are approving prior authorization requests on a case-by-case basis.

We have a dedicated patient reimbursement support team in the United States that works collaboratively with patients and providers to help secure the appropriate prior authorization approvals in advance of treatment. We continue to educate private insurers in the United States on our clinical data and patient selection tools in an effort to continue to expand the number of positive coverage policies, in order to increase our revenue. Outside of the United States, our solution is covered by major health systems across much of Europe, Australia, South Korea and Japan.

Competition

Our industry is highly competitive and subject to rapid change from the introduction of new products and technologies and other activities of industry participants. Our goal is to establish our solution as a standard of care for severe emphysema. Existing treatments include medical management, lung volume reduction surgery (“LVRS”), lung transplantation as well as other minimally invasive treatments. Some of our competitors have several competitive advantages, including established relationships with pulmonologists who commonly treat patients with emphysema, significantly greater name recognition and significantly greater sales and marketing resources. In addition to competing for market share, we also compete against these companies for personnel, including qualified sales and other personnel that are necessary to grow our business. Certain of our competitors may challenge our intellectual property, may develop additional competing or superior technologies and processes and compete more aggressively and sustain that competition over a longer period of time than we could. In addition to existing competitors, other companies may acquire or in-license competitive products and could directly compete with us. We must continue to successfully compete in light of our competitors’ existing and future products and related pricing and their resources to successfully market to the physicians who use our products.

Leveraging Our Manufacturing Capacity is Critical to Improving Our Gross Margin

With our current operating model and infrastructure, we have the capacity to significantly increase our manufacturing production. If we grow our revenue and sell more units, our fixed manufacturing costs will be spread over more units, which we believe will reduce our manufacturing costs on a per-unit basis and in turn improve our gross margin. In addition, we intend to continue investing in manufacturing efficiencies in order to reduce our overall manufacturing costs. However, other factors will continue to impact our gross margins such as geographic mix, pricing and customer discounts, incentives, support services and potential seasonality.

Investing in Research and Development to Foster Innovation to Expand Our Addressable Market

We intend to continue investing in existing and next generation technologies to further improve our products and clinical outcomes, enhance patient selection and broaden the patient population that can be treated with our products.

In addition, we are continuing to invest in the accuracy and features of our patient assessment tools. Moreover, we continue to make progress with our CONVERT II pivotal trial of AeriSeal, a potential product in development for the treatment of severe emphysema patients who are not qualified for Zephyr Valve treatment due to excessive collateral ventilation.

While research and development and clinical testing are time consuming and costly, we believe that a pipeline of new products and product enhancements that improve efficacy, safety and cost effectiveness is critical to increasing the adoption of our solution.

Seasonality

Historically, we have experienced seasonality, primarily in the first and third quarters and anticipate this trend to continue. In addition, as our sales grow, we may experience further seasonality based on holidays, vacations and other factors because this is an elective procedure.

Components of Our Results of Operations

Revenue

We currently derive substantially all of our revenue from the sale of our products to hospitals and distributors. We market and sell our products through a direct sales organization in the United States and through direct sales and several third-party distributors in select markets outside the United States. We currently generate most of our revenue from the sales of Zephyr Valves and delivery catheters. We also generate a smaller amount of our revenue from our Chartis System, which is comprised of sales of the balloon catheters, usage fees and sales of the Chartis console. The StratX Platform, which is used to identify patients eligible for treatment with Zephyr Valves, does not independently generate any revenue for us. No single customer accounted for more than 10% of our revenue during the six months ended June 30, 2024 and June 30, 2023.

Revenue from sales of our products fluctuates based on volume of cases (procedures performed), the average number of Zephyr Valves used for a patient, pricing, discounts, incentives and mix of U.S. and international sales. Our revenue also fluctuates and will continue to fluctuate from quarter-to-quarter due to a variety of factors, including the availability of reimbursement, the size and success of our sales force, the number of hospitals and physicians who are aware of and perform the procedures using our solution and seasonality. Our revenue from international sales may also be impacted by fluctuations in foreign currency exchange rates between the U.S. dollar (our reporting currency) and the local currency.

Cost of Goods Sold and Gross Margin

Cost of goods sold consists primarily of payroll and personnel-related expenses for our manufacturing and quality assurance employees, costs related to materials, components and subassemblies, third-party costs, manufacturing overhead, equipment depreciation, and charges for excess, obsolete and non-sellable inventories. Overhead costs include the cost of quality assurance, testing, material procurement, inventory control, operations supervision and management and an allocation of facilities overhead cost, including rent and utilities. Cost of goods sold also includes certain direct costs such as those incurred for shipping our products and costs related to providing analysis services for patient scans. We record adjustments to our inventory valuation for estimated excess, obsolete and non-sellable inventories based on assumptions about future demand, past usage, changes to manufacturing processes and overall market conditions. We expect cost of goods sold to increase in absolute dollars to the extent more of our products are sold.

We calculate gross margin as gross profit divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, primarily by our manufacturing costs, pricing pressures and, to a lesser extent, the percentage of products we sell in the United States versus internationally and the percentage of products we sell to distributors versus directly to hospitals. Our gross margin is typically higher on products we sell directly to hospitals as compared to products we sell through distributors.

Our gross margin may increase over the long term to the extent our production volume increases as our fixed manufacturing costs would be spread over a larger number of units, thereby reducing our per-unit manufacturing costs. We expect our gross margin to fluctuate from period to period, however, based upon the factors described above and seasonality.

Operating Expenses

Our operating expenses have consisted solely of research and development costs and selling, general and administrative costs.

Research and Development Expenses

Our research and development activities primarily consist of engineering and research programs associated with our products under development and improvements to our existing products. Research and development expenses include payroll and personnel-related costs for our research and development employees, including expenses related to stock-based compensation, consulting services, clinical trial expenses, prototyping, testing, laboratory supplies, impairment charges associated with capitalized internally developed software, and an allocation of facility overhead costs. Our clinical trial expenses, such as those related to our AeriSeal clinical development program, include costs associated with clinical trial design, clinical trial site development and study costs, data management costs, related travel expenses and the cost of products used for clinical activities. We expense research and development costs as they are incurred. We expect our research and development expenses, including related stock-based compensation expense, to increase in absolute dollars as we hire additional personnel to develop new product offerings and product enhancements.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist of payroll and personnel-related costs for our sales and marketing personnel, including variable sales compensation, travel expenses, consulting, public relations costs, direct marketing, customer training, trade show and promotional expenses, stock-based compensation and allocated facility overhead costs, and for administrative personnel that support our general operations such as information technology, executive management, finance and accounting, customer services and human resources personnel. We expense sales variable compensation at the time of the sale. Selling, general and administrative expenses also include costs attributable to professional fees for legal and accounting services, insurance, consulting fees, recruiting fees, travel expense, bad debt expense and depreciation.

We intend to continue to increase our sales and marketing spending to generate sales opportunities. We expect expenses to increase in absolute dollars as we increase our sales support infrastructure and add additional marketing programs in order to more fully penetrate the global opportunity. We also expect our administrative expenses, including stock-based compensation expense, to increase as we increase our headcount and expand our facilities and information technology to support our operations. Additionally, we incur expenses related to audit, legal, regulatory and tax-related services associated with being a public company, compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs. Our selling, general and administrative expenses may fluctuate from period to period due to the seasonality of our business and as we continue to add direct sales territory managers in new territories.

Interest Expense and Income

Interest expense consists primarily of interest expense related to our term loan facilities, including amortization of debt discount and issuance costs. Interest income is predominantly derived from investing surplus cash in money market funds and marketable securities.

Other (Expense) Income,

Pulmonx Corp [LUNG] Filings
10-Q	[2024-08-02]
10-Q	[2024-05-03]
10-K	[2024-02-27]
10-Q	[2023-11-03]
10-Q	[2023-08-04]
10-Q	[2023-05-08]
10-K	[2023-03-01]
10-Q	[2022-11-08]
10-Q	[2022-08-08]
10-Q	[2022-05-09]
10-K	[2022-03-01]
10-Q	[2021-11-09]
10-Q	[2021-08-10]
10-Q	[2021-05-12]
10-K	[2021-03-15]
10-Q	[2020-11-13]
S-1	[2020-09-04]
S-1	[2020-02-28]