10-Q 1 lung-20220331.htm 10-Q lung-20220331
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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 March 31, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from        to
Commission File Number: 001-39562
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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareLUNGThe 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 April 30, 2022 there were 37,116,596 shares of the Registrant’s Common Stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2
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 “anticipate,” “believe,” “contemplate,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “target,” “should,” “will,” 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 expectations regarding the impact of the COVID-19 pandemic on our business;
•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;
i
•our ability to obtain and maintain regulatory approval or clearance of our products on expected timelines;
•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 and the remediation of any material weaknesses thereunder;
•our financial performance and capital requirements; and
•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.
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.
ii
Part I. Financial Information
Item 1. Financial Statements
Pulmonx Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
March 31, 2022December 31, 2021
Assets
Current assets
Cash and cash equivalents$129,168 $148,480 
Restricted cash231 231 
Short-term marketable securities40,914 31,561 
Accounts receivable, net6,810 6,562 
Inventory18,304 16,285 
Prepaid expenses and other current assets5,298 4,883 
Total current assets200,725 208,002 
Long-term marketable securities6,379 10,941 
Property and equipment, net4,918 4,814 
Goodwill2,333 2,333 
Intangible assets, net247 277 
Right of use assets7,518 8,075 
Other long-term assets729 731 
Total assets$222,849 $235,173 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$2,803 $1,582 
Accrued liabilities10,872 13,366 
Income taxes payable143 147 
Deferred revenue132 163 
Short-term debt798 91 
Current lease liabilities2,967 2,201 
Total current liabilities17,715 17,550 
Deferred tax liability53 37 
Long-term lease liabilities6,128 6,844 
Long-term debt16,629 17,324 
Other long-term liabilities179 179 
Total liabilities40,704 41,934 
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2022 and December 31, 2021
— — 
Common stock, $0.001 par value, 200,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 37,098,421 shares issued and outstanding as of March 31, 2022 and 36,931,762 shares issued and outstanding as December 31, 2021
37 37 
Additional paid-in capital487,888 482,885 
Accumulated other comprehensive income1,443 1,712 
Accumulated deficit(307,223)(291,395)
Total stockholders’ equity182,145 193,239 
Total liabilities and stockholders’ equity$222,849 $235,173 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
1
Pulmonx Corporation
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended March 31,
20222021
Revenue$10,785 $9,244 
Cost of goods sold2,674 2,633 
Gross profit8,111 6,611 
Operating expenses
Research and development3,534 3,034 
Selling, general and administrative20,245 16,071 
Total operating expenses23,779 19,105 
Loss from operations(15,668)(12,494)
Interest income105 105 
Interest expense(198)(217)
Other income, net— 161 
Net loss before tax(15,761)(12,445)
Income tax expense67 67 
Net loss(15,828)(12,512)
Other comprehensive income
Currency translation adjustment(24)(272)
Change in unrealized losses on marketable securities(245)(3)
Total other comprehensive loss(269)(275)
Comprehensive loss$(16,097)$(12,787)
Net loss per share attributable to common stockholders, basic and diluted$(0.43)$(0.35)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
36,805,366 35,370,760 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
2
Pulmonx Corporation
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(unaudited)

Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Income		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balances at January 1, 202236,931,762 $37 $482,885 $1,712 $(291,395)$193,239 
Issuance of common stock upon vesting of restricted stock units21,392 — — — — — 
Issuance of common stock upon exercise of stock options99,265 — 221 — — 221 
Issuance of shares pursuant to Employee Stock Purchase Plan46,002 — 1,108 — — 1,108 
Change in shares subject to repurchase— — 59 — — 59 
Stock-based compensation expense— — 3,615 — — 3,615 
Currency translation adjustment— — — (24)— (24)
Change in unrealized losses on marketable securities— — — (245)— (245)
Net loss— — — — (15,828)(15,828)
Balances at March 31, 202237,098,421 $37 $487,888 $1,443 $(307,223)$182,145 
Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Income		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount
Balances at January 1, 202135,693,753 $36 $467,147 $1,685 $(242,734)$226,134 
Issuance of common stock upon exercise of stock options122,856 — 273 — — 273 
Repurchase of early exercised common stock options(12,945)— — — — — 
Change in shares subject to repurchase— — 66 — — 66 
Stock-based compensation expense— — 2,462 — — 2,462 
Currency translation adjustment— — — (272)— (272)
Change in unrealized losses on marketable securities— — — (3)— (3)
Net loss— — — — (12,512)(12,512)
Balances at March 31, 202135,803,664 $36 $469,948 $1,410 $(255,246)$216,148 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
3
Pulmonx Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended March 31,
20222021
Cash flows from operating activities
Net loss$(15,828)$(12,512)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense3,513 2,268 
Allowance for doubtful accounts— (1)
Inventory write-downs46 453 
Depreciation and amortization expense368 141 
Amortization of debt discount and debt issuance costs18 39 
Amortization of premiums and discounts on short-term marketable securities21 4 
Non-cash lease expense614 572 
Net changes in operating assets and liabilities:
Accounts receivable(277)(1,014)
Inventory(2,021)(1,630)
Prepaid expenses and other current assets(406)404 
Other assets17 8 
Accounts payable1,261 302 
Accrued liabilities(2,313)1,742 
Income taxes payable(2)30 
Lease liabilities(7)(496)
Deferred tax liability— 10 
Deferred revenue(30)8 
Net cash used in operating activities(15,026)(9,672)
Cash flows from investing activities
Purchases of investments(9,308)(12,289)
Maturities of short-term marketable securities4,250 — 
Purchases of property and equipment(564)(242)
Net cash used in investing activities(5,622)(12,531)
Cash flows from financing activities
Payment of debt issuance cost— (30)
Proceeds from exercise of common stock options207 69 
Proceeds from issuance of common stock under the employee stock purchase plan1,108 — 
Payments for repurchase of early exercised common stock options— (26)
Net cash provided by financing activities1,315 13 
Effect of exchange rate changes on cash and cash equivalents21 (88)
Net decrease in cash and cash equivalents(19,312)(22,278)
Cash, cash equivalents and restricted cash, at beginning of the period148,711 231,792 
Cash, cash equivalents and restricted cash, at end of the period$129,399 $209,514 
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets:
Cash and cash equivalents$129,168 $209,283 
Restricted cash231 231 
Cash, cash equivalents and restricted cash in consolidated balance sheets$129,399 $209,514 
Supplemental non-cash items:
Lapse in repurchase rights of common stock$59 $66 
Purchases of property and equipment in accounts payable$456 $144 
Amount receivable from exercise of common stock options$24 $204 
4
Supplemental disclosure of cash flow information:
Cash paid for income taxes$29 $23 
Cash paid for interest$178 $178 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
5
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”), 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 and Hong Kong.
Liquidity and Going Concern
The Company has incurred operating losses and negative cash flows from operations to date and has an accumulated deficit of $307.2 million as of March 31, 2022. During the three months ended March 31, 2022 and March 31, 2021, the Company used $15.0 million and $9.7 million of cash in its operating activities, respectively. As of March 31, 2022, the Company had cash, cash equivalents and marketable securities of $176.5 million. Historically, the Company’s activities have been financed through private placements of equity securities, debt and sale of common stock in the IPO.
The Company’s 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.
Impact of the COVID-19 Pandemic
There continues to be widespread significant impact from the COVID-19 pandemic, which has delayed clinical trials and FDA operations and adversely impacted the number of procedures performed using our products. In the markets in which we operate, elective, specialty and other procedures and appointments have been, and continue to be, suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of COVID-19 patients. As a result, the COVID-19 pandemic and the measures taken by many countries in response have materially adversely affected, and could in the future materially adversely affect, our business, financial condition and results of operations, as well as the price of our common stock, from a decrease and delay of procedures involving our products.
In the first quarter of 2022, procedure volumes in our U.S. and international markets were adversely affected by the Omicron variant, followed by a recovery as treatment centers began to reschedule and conduct procedures later in the quarter. We may continue to see regional variations in procedure volumes in our U.S. and international markets from the COVID-19 pandemic and its variants.
The Company’s unaudited interim condensed consolidated financial statements reflect judgments and estimates that could change in the future as a result of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted the Company’s business, financial condition and results of operations by decreasing and delaying procedures performed using its products. While many regions begin to stabilize with improvements in procedure volumes, there continues to be variability and uncertainty as variants of the virus emerge. The Company can make no assurance regarding any future level of demand for the Company’s products, and COVID-19 may adversely impact the results of operations and financial condition.
6
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

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 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, 2021 was derived from the Company’s audited financial statements, but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, 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 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 conjunction with the audited financial statements as of and for the year ended December 31, 2021 and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 1, 2022. 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 March 31, 2022 and condensed consolidated results of operations and cash flows for the three months ended March 31, 2022 and 2021 have been made. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.
Use of Estimates
The preparation of unaudited interim condensed consolidated financial statements in conformity with 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, the recoverability of long term assets, valuation of common stock, stock-based compensation, intangible assets, goodwill, debt and related features, 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 2 inputs based on their quoted market values (Note 4).
7
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

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 March 31, 2022 and December 31, 2021, the Company also had cash on deposit with foreign banks of approximately $2.8 million and $4.6 million, respectively, that was not federally insured.
The Company earns revenue from the sale of its products to distributors and other customers such as hospitals. Sales of Zephyr Valves and delivery catheters accounted for most of the Company’s revenue for the three months ended March 31, 2022 and 2021. The Company’s accounts receivable are derived from revenue earned from distributors and customers. The Company performs ongoing credit evaluations of its customers’ and distributors’ financial condition and generally requires no collateral from its customers and distributors. At March 31, 2022 and December 31, 2021, no customer or distributor accounted for more than 10% of accounts receivable. During the three months ended March 31, 2022 and March 31, 2021, no customer or distributor 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.
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 subsidiary in Italy is the Euro. Accordingly, asset and liability accounts of Switzerland, Germany, Australia, the United Kingdom, Italy and Hong Kong 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 $(0.3) million during the three months ended March 31, 2022 and 2021, respectively.
Foreign currency transaction gains and losses are included in other income (expense), 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 March 31, 2022 and 2021, 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
8
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

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 March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning an interim period that includes or is subsequent to March 12, 2020, or prospectively from the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company may elect to apply ASU 2020-04 as its contracts referenced in London Interbank Offered Rate (“LIBOR”) are impacted by reference rate reform. The Company is currently evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. This new guidance will require financial instruments to be measured at amortized cost, and trade accounts receivable to be presented at the net amount expected to be collected. The new model requires an entity to estimate credit losses based on historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. In November 2019, the FASB issued ASU 2019-10, according to which, the new standard is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, including the Company, the new standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements.
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.
9
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

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. As noted above, 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 and is classified as a Level 2 liability.
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 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):
March 31, 2022
Level 1Level 2Level 3Total
Assets:
Money market funds
$250 $— $— $250 
Commercial paper
— 1,996 — 1,996 
Cash equivalents250 1,996 — 2,246 
U.S. Government agency bonds23,323 4,995 — 28,318 
Corporate bonds
— 2,151 — 2,151 
Commercial paper
— 16,824 — 16,824 
Marketable securities23,323 23,970 — 47,293 
Total financial assets$23,573 $25,966 $— $49,539 
There were no liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2022.
December 31, 2021
Level 1Level 2Level 3Total
Assets:
Money market funds$831 $— $— $831 
Commercial paper— 2,000 — 2,000 
Corporate bonds— 4,410 — 4,410 
Cash equivalents831 6,410 — 7,241 
U.S. Government agency bonds14,977 5,504 — 20,481 
Commercial paper— 19,107 — 19,107 
Corporate bonds— 2,914 — 2,914 
Marketable securities14,977 27,525 — 42,502 
Total financial assets$15,808 $33,935 $— $49,743 
There were no liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2021.
10
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the cost, unrealized gains and losses and fair value of marketable securities (in thousands):
March 31, 2022
Amortized CostUnrealized LossesUnrealized GainsFair Value
U.S. Government agency bonds$28,548 $(230)$— $28,318 
Corporate bonds
2,152 (1)— 2,151 
Commercial paper
16,863 (39)— 16,824 
Marketable securities$47,563 $(270)$— $47,293 
Amounts recognized on the consolidated balance sheet
Short-term marketable securities
40,914 
   Long-term marketable securities6,379 
Marketable securities$47,293 
December 31, 2021
Amortized CostUnrealized LossesUnrealized GainsFair Value
U.S. Government agency bonds$20,509 $(28)$— $20,481 
Corporate bonds
2,915 (1)— 2,914 
Commercial paper
19,102 — 5 19,107 
Marketable securities$42,526 $(29)$5 $42,502 
Amounts recognized on the consolidated balance sheet
Short-term marketable securities
31,561 
   Long-term marketable securities10,941 
Marketable securities$42,502 
Accrued interest on marketable securities of less than $0.1 million and less than $0.1 million as of March 31, 2022 and December 31, 2021, respectively, is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.
5.    Balance Sheet Components
Cash and Cash Equivalents
The Company’s cash and cash equivalents consist of the following (in thousands):
March 31,December 31,
20222021
Cash$126,922 $141,239 
Cash equivalents:
Money market funds
250 831 
Commercial paper
1,996 2,000 
Corporate bonds— 4,410 
Total cash and cash equivalents$129,168 $148,480 
11
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

Inventory
Inventory consists of the following (in thousands):
March 31,December 31,
20222021
Raw materials$3,752 $3,738 
Work in process750 518 
Finished goods13,802 12,029 
Total inventory$18,304 $16,285 
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
March 31,December 31,
20222021
Prepaid expenses$2,658 $1,869 
Prepaid insurance1,661 2,305 
VAT receivable277 362 
Other current assets702 347 
Total prepaid expenses and other current assets$5,298 $4,883 
Property and Equipment, Net
Property and equipment, net consist of the following (in thousands):
March 31,December 31,
20222021
Machinery and equipment$1,804 $1,635 
Computer equipment and software1,634 1,561 
Furniture and fixtures257 252 
Leasehold improvements2,277 2,277 
Construction in progress1,516 1,332 
Total7,488 7,057 
Less: accumulated depreciation(2,570)(2,243)
Property and equipment, net$4,918 $4,814 
Depreciation expense for the three months ended March 31, 2022 and March 31, 2021 was $0.3 million and $0.1 million, respectively.
Goodwill
Goodwill was $2.3 million as of March 31, 2022 and December 31, 2021 arising from the Company’s acquisition of Emphasys Medical, Inc, in March 2009. No goodwill impairment losses have been recognized since the acquisition. There were no acquisitions or dispositions of goodwill in three months ended March 31, 2022 and 2021. The Company assesses goodwill for impairment annually, or more frequently, when events or changes in circumstances indicate there may be impairment. Through March 31, 2022, there have been no events or changes in circumstances
12
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

that indicated that the carrying value of goodwill may not be recoverable. As a result, no impairment charge was recorded during the three months ended March 31, 2022.
Intangible Assets
Intangible assets consist of the following (in thousands):
March 31, 2022
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Developed technology$1,658 $(1,436)$222 
Trademarks191 (166)25 
Total intangible assets$1,849 $(1,602)$247 
December 31, 2021
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Developed technology$1,658 $(1,410)$248 
Trademarks191 (162)29 
Total intangible assets$1,849 $(1,572)$277 
Amortization expense relating to the intangibles totaled less than $0.1 million during each of the three months ended March 31, 2022 and March 31, 2021, respectively.
Future amortization expense is as follows as of March 31, 2022 (in thousands):
2022 (remaining nine months)$93 
2023123 
202431 
Total amortization expense
$247 
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
March 31,December 31,
20222021
Accrued employee bonuses and commissions$2,504 $4,741 
Accrued vacation2,137 1,850 
Other accrued personnel related expenses1,844 2,145 
Accrued professional fees2,747 2,420 
Sales taxes, franchise tax and VAT511 730 
Liability for early exercise of stock options340 399 
Accrued inventory purchases134 258 
Other655 823 
Total accrued liabilities$10,872 $13,366 
13
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

6.    Long Term Debt and Convertible Notes
Term Loan
CIBC Loan
On February 20, 2020, the Company executed a Loan and Security Agreement (the “CIBC Agreement”) with Canadian Imperial Bank of Commerce (“CIBC”) to raise up to $32.0 million in debt financing (“CIBC Loan”) consisting of $17.0 million advanced at the closing of the agreement (“Tranche A”), with the option to drawing 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 Tranch C was drawn before the expiration date. 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. 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 loan, subject to certain requirements. The CIBC Agreement includes customary restrictive covenants, financial covenants, events of default and other customary terms and conditions.
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 Agreement which extended the maturity date 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 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 Loan and Security agreement with CIBC 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 Loan and Security Agreement with CIBC, which extended the interest only period of the loan from 24 months to 36 months. Under the amended terms, principal repayment will begin in February 2023. There was no change to the loan interest rate or maturity date.
As of March 31, 2022, the CIBC Loan had an annual effective interest rate of 4.71% per year.
The financial covenants in the CIBC Agreement require that, when the cash and cash equivalents of the Company 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 or greater than the Adjusted EBITDA loss as defined in the CIBC Agreement for the four-month period ending on any date of determination. As of March 31, 2022, the Company was in compliance with all covenants contained in CIBC Agreement.
14
Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

The CIBC Loan consists of the following (in thousands):
March 31,December 31,
20222021
Term loan
$17,000 $17,000 
Less: debt issuance costs
(113)(131)
Term loan
$16,887 $16,869 
The Company paid $0.4 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 three months ended March 31, 2022 and 2021, the Company recorded interest expense related to debt discount and debt issuance costs of CIBC Loan of less than $0.1 million and less than $0.1 million, respectively.
Interest expense on the CIBC Loan amounted $0.2 million and $0.2 million during the three months ended March 31, 2022 and 2021, respectively.
Credit Agreement
In April 2020, Pulmonx International Sàrl, a wholly-owned subsidiary of the Company, entered into a COVID-19 Credit Agreement with UBS Switzerland AG to receive up to 0.5 million Swiss Francs ($0.5 million U.S. dollar equivalent) under Swiss Federal Government program to mitigate the economic impact of the spread of the coronavirus. In May 2020, Pulmonx International Sàrl received $0.5 million Swiss Francs ($0.5 million U.S. dollar equivalent) under the COVID-19 Credit Agreement. The COVID-19 Credit Agreement bears no interest and is being repaid in twelve equal installments, paid semi-annually, beginning in March of 2022. As of March 31, 2022, Pulmonx International Sàrl paid less than $0.1 million to the lender.
Contractual Maturities of Financing Obligations
As of March 31, 2022, the aggregate future payments under the CIBC Loan and Credit Agreement (including interest payments) are as follows (in thousands):
2022 (remaining nine months)$635 
20237,782 
20248,846 
20251,513 
202690 
202790 
Total18,956 
Less: unamortized debt discount(113)
Less: interest(1,416)
 Term loan and credit agreement
$17,427 
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 $0.2 million as of March 31, 2022 and December 31, 2021, respectively. The deferred revenue as of December 31, 2020 was $0.1 million, which was
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

recognized as revenue during the year ended December 31, 2021. The deferred revenue as of December 31, 2021 was $0.2 million, which was recognized as revenue during the three months ended March 31, 2022.
The Company disaggregates its revenue by major geographic region, which is disclosed in Note 12, “Segment Information”.
8.    Leases, Lease Commitments and Contingencies
The Company has a lease for its headquarters location in Redwood City, California. In October 2019, the Company renewed its lease for the headquarters location in Redwood City, California for an additional five years commencing in August 2020 and expiring in July 2025. The monthly base rent during the renewed term is $0.1 million and is subject to an annual increase of 3.5%. The Company is responsible for its share of real estate taxes, common area maintenance and management fees. The Company is eligible to receive a tenant improvement allowance of $0.2 million on commencement of the renewal term in August 2020.
During 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 April 2020, the Company executed a sublease for another office facility in Redwood City, California for a three-year term commencing on June 1, 2020. The lease agreement provides for early termination if the Company or Sublandlord elects to terminate the lease by providing the other party at least 180 days prior written notice. The early termination may only occur on or after the expiration of the 18th full calendar month of the sublease term. The monthly base rent during the term is less than $0.1 million and is subject to an annual increase of 3.5%. The Company is responsible for its share of real estate taxes, common area maintenance and management fees.
In September 2020, the Company amended a sublease agreement entered into in April 2020, to include additional facility space in Redwood City, California for a four-year term. The amendment was accounted as a separate sublease agreement. The sublease agreement contained a rent free period through February 14, 2021, after which rent is approximately $0.1 million per month and is subject to an annual increase of 3.5%. The Company is responsible for its share of real estate taxes, common area maintenance and management fees. The Company is eligible to receive a tenant improvement allowance of $0.7 million to fund facility enhancements. The sublease agreement can be extended for an additional twelve month period, at the Company’s option. For accounting purposes, the lease term is 4 years as it is not reasonably certain that the Company will exercise the renewal option. The amendment also changed the lease term entered into in April 2020, which was extended until May 31, 2024, but left the early termination clause unchanged. In September 2021, the Company became reasonably certain that the early termination clause would not be exercised as capital expenditures on the facility build-out created sufficient disincentive to terminate the lease early. The lease term was reevaluated and extended from November 30, 2021 to May 31, 2024.
The Company has leases on six vehicles with an average term of 2.9 years.
Operating lease cost consists of the following (in thousands):
Three Months Ended March 31,
20222021
Operating lease cost
$724 $728 
Short-term lease cost
9 3 
Variable lease cost
147 147 
Total lease cost
$880 $878 
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes a maturity analysis of the Company’s lease liabilities showing the aggregate lease payments as of March 31, 2022 (in thousands):
2022 (remaining nine months)$2,544 
20233,429 
20242,895 
20251,009 
Total minimum lease payments9,877 
Less: Amount of lease payments representing interest782 
Present value of future minimum lease payments$9,095 
Less: Current lease liabilities
2,967 
Long-term lease liabilities$6,128 
The following table summarizes additional information related to the Company’s operating leases (in thousands, except weighted average data):
March 31,
2022		December 31,
2021
Right of use asset
$7,518 $8,075 
Weighted average remaining lease term (years)2.663.17
Weighted average discount rate (percent)5.9 6.0 
The following table summarizes other supplemental information related to the Company’s operating leases (in thousands):
Three Months Ended March 31,
20222021
Cash paid for amounts included in the measurement of lease liabilities included in cash flows used in operating activities
$131 $541 
Right-of-use assets obtained in exchange for lease liabilities
$56 $— 
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.
9.    Income Taxes
The income tax expense for each of the three months ended March 31, 2022 and 2021 was less than $0.1 million. 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 income tax rate and the U.S. federal statutory rate is primarily attributable to unrecognized US federal and state tax benefit because of a full valuation allowance the Company has established against its Federal and state deferred tax assets and foreign tax rate differential from US federal statutory rate.
The income tax expense for the three months ended March 31, 2022 and 2021 relates primarily to state minimum income tax and income tax on the Company’s earnings in foreign jurisdictions.
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

10.    Stockholders’ Equity
Common Stock
As of March 31, 2022 and December 31, 2021, the Company’s certificate of incorporation authorized the Company to issue up to 200,000,000 and 200,000,000 shares of common stock, respectively. Common stockholders are entitled to dividends as and when declared by the 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.
Shares Reserved for Future Issuance
The Company has reserved shares of common stock for future issuances as follows:
March 31December 31,
20222021
Common stock options issued and outstanding
2,687,031 2,145,131 
Common stock restricted stock units issued and outstanding1,110,887 442,428 
Common stock available for future grants
3,909,758 3,751,115 
Common stock available for ESPP1,255,773 932,458 
Total8,963,449 7,271,132 

Stock Option Plan
A summary of stock option activity for the three months ended March 31, 2022 is set forth below:
Outstanding Options
Number of SharesWeighted Average Exercise Price
Balance, January 1, 2022
2,145,131 $13.44 
Granted
655,200 26.56 
Exercised
(99,265)2.23 
Canceled
(14,035)23.30 
Balance, March 31, 2022
2,687,031 $17.00 
The aggregate intrinsic value of options outstanding at March 31, 2022 was $30.6 million.
March 31, 2022
Number of Shares
Weighted Average Exercise Price
Weighted Average Contractual Life (in Years)
Options vested790,519$9.37 7.21
Options vested and expected to vest2,687,031$17.00 8.46
Total intrinsic value of options vested as of March 31, 2022 was $13.8 million.
Early Exercise of Stock Options
Under the terms of the individual option grants, all options are fully exercisable on the grant date, subject to the Company’s repurchase right at the original exercise price. Accordingly, options may be exercised prior to vesting.
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

The shares are subject to the Company’s lapsing repurchase right upon termination of employment or over the options’ vesting period of generally four years at the original purchase price. The proceeds initially are recorded in other liabilities from the early exercise of stock options and are reclassified to additional paid-in capital as the Company’s repurchase right lapses. During the three months ended March 31, 2022, the Company did not repurchase any shares of common stock. During the three months ended March 31, 2021, the Company repurchased 12,945 shares of common stock for less than $0.1 million. As of March 31, 2022 and December 31, 2021, 189,266 and 223,195 shares, respectively, were subject to repurchase, with an aggregate exercise price of $0.3 million and $0.4 million, respectively, and were recorded in other current liabilities.
Restricted Stock Units
Activity with respect to restricted stock units was as follows:
Outstanding Restricted Stock
Number of SharesWeighted Average Grant Date Fair Value
Unvested, January 1, 2022442,428 $42.36 
Granted701,250 26.56 
Vested
(21,392)44.54 
Canceled
(11,399)37.24 
Unvested, March 31, 20221,110,887 $32.40 
The aggregate intrinsic value of restricted stock units outstanding as of March 31, 2022 was $27.6 million.
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 March 31,
20222021
Cost of goods sold$147 $90 
Research and development421 318 
Selling, general and administrative2,945 1,860 
Total$3,513 $2,268 
The above stock-based compensation expense related to the following equity-based awards (in thousands):
Three Months Ended March 31,
20222021
Stock options and restricted stock units$3,312 $1,039 
ESPP201 1,229 
Total$3,513 $