Company Quick10K Filing
Pulmonx Corp
Price-0.00 EPS-1
Shares4 P/E0
MCap-0 P/FCF0
Net Debt4 EBIT-3
TEV4 TEV/EBIT-1
TTM 2019-03-31, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-13
S-1 2020-09-04 Public Filing
10-Q 2020-06-30 Filed 2020-09-16
10-Q 2020-03-31 Filed 2020-08-25
S-1 2020-02-28 Public Filing
10-K 2019-12-31 Filed 2020-07-15
10-Q 2019-09-30 Filed 2020-05-08
10-Q 2019-06-30 Filed 2020-03-04
10-Q 2019-03-31 Filed 2019-06-20
10-K 2018-12-31 Filed 2019-04-16
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-21
10-K 2017-12-31 Filed 2018-04-17
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-22
10-K 2016-12-31 Filed 2017-04-17
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-04-14
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-03-31
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-15
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-04-03
10-Q 2013-09-30 Filed 2013-12-09
10-Q 2013-03-31 Filed 2013-10-17
10-Q 2013-03-31 Filed 2013-10-17
10-K 2012-12-31 Filed 2013-08-30
10-Q 2012-09-30 Filed 2012-11-19
10-Q 2012-06-30 Filed 2012-08-17
10-Q 2012-03-31 Filed 2012-05-21
8-K 2020-05-27
8-K 2020-05-22
8-K 2020-03-09
8-K 2020-02-27
8-K 2020-02-13
8-K 2020-02-12
8-K 2019-11-27
8-K 2019-11-26
8-K 2019-08-07
8-K 2019-08-07
8-K 2019-08-02
8-K 2019-06-10
8-K 2018-12-03
8-K 2018-11-01
8-K 2018-10-25
8-K 2018-10-23
8-K 2018-10-02
8-K 2018-10-01
8-K 2018-09-19
8-K 2018-09-13
8-K 2018-09-05
8-K 2018-08-27
8-K 2018-08-15
8-K 2018-07-30
8-K 2018-07-10
8-K 2018-06-26
8-K 2018-02-22

LUNG 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 exhibit31193020.htm
EX-31.2 exhibit31293020.htm
EX-32.1 exhibit32193020.htm
EX-32.2 exhibit32293020.htm

Pulmonx Corp Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
3.72.00.3-1.3-3.0-4.72012201420172020
Assets, Equity
0.3-0.1-0.5-1.0-1.4-1.82012201420172020
Rev, G Profit, Net Income
2.61.81.00.3-0.5-1.32012201420172020
Ops, Inv, Fin

lung-20200930
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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 September 30, 2020
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 October 30, 2020 there were 35,668,953 shares of the Registrant’s Common Stock, par value $0.001 per share, outstanding.



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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.
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements 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 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;
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;
i

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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 expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;
our ability to develop and maintain our corporate infrastructure, including our internal controls;
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.
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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)
September 30, 2020December 31, 2019
Assets
Current assets
Cash and cash equivalents$39,806 $14,767 
Restricted cash231  
Short-term marketable securities 13,580 
Accounts receivable, net5,260 5,511 
Inventory9,288 5,612 
Prepaid expenses and other current assets1,037 1,601 
Total current assets55,622 41,071 
Property and equipment, net1,164 902 
Goodwill2,333 2,333 
Intangible assets, net431 524 
Deferred offering costs1,680 1,563 
Right of use assets9,489 6,561 
Other long-term assets525 579 
Total assets$71,244 $53,533 
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
Current liabilities
Accounts payable$2,297 $2,681 
Accrued liabilities8,844 9,463 
Income taxes payable158 233 
Deferred revenue92 173 
Current lease liabilities1,927 446 
Derivative liabilities1,856 1,165 
Total current liabilities15,174 14,161 
Deferred tax liability54 43 
Long-term lease liabilities8,250 6,403 
Credit agreement539  
Term loan16,763 14,965 
Convertible notes29,754  
Total liabilities70,534 35,572 
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Commitments and contingencies (Note 8)
Convertible preferred stock, $0.001 par value, 22,874,341 and 177,985,811 shares authorized as of September 30, 2020 and December 31, 2019; 17,797,026 and 17,583,150 shares issued and outstanding as of September 30, 2020 and December 31, 2019; liquidation value of $212,870 and $210,610 as of September 30, 2020 and December 31, 2019 (Note 11)
207,599 205,339 
Stockholders’ deficit
Common stock, $0.001 par value, 200,000,000 shares authorized as of September 30, 2020 and 240,000,000 shares authorized as of December 31, 2019; 3,801,824 shares issued and outstanding as of September 30, 2020 and 2,100,203 shares issued and outstanding as December 31, 2019
4 2 
Additional paid-in capital24,896 21,750 
Accumulated other comprehensive income1,648 1,373 
Accumulated deficit(233,437)(210,503)
Total stockholders’ deficit(206,889)(187,378)
Total liabilities, convertible preferred stock and stockholders’ deficit$71,244 $53,533 
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 September 30,Nine Months Ended September 30,
2020201920202019
Revenue$10,612 $9,104 $22,903 $22,248 
Cost of goods sold3,150 2,697 8,779 7,171 
Gross profit7,462 6,407 14,124 15,077 
Operating expenses
Research and development1,997 1,399 4,988 4,446 
Selling, general and administrative10,813 8,621 32,114 24,179 
Total operating expenses12,810 10,020 37,102 28,625 
Loss from operations(5,348)(3,613)(22,978)(13,548)
Interest income9 167 98 310 
Interest expense(1,103)(460)(2,914)(1,867)
Other income (expense), net2,631 (340)3,052 (713)
Net loss before tax(3,811)(4,246)(22,742)(15,818)
Income tax expense49 89 192 216 
Net loss(3,860)(4,335)(22,934)(16,034)
Other comprehensive income
Currency translation adjustment33 71 281 127 
Change in unrealized (losses) gains on marketable securities 7 (6)7 
Total other comprehensive income33 78 275 134 
Comprehensive loss$(3,827)$(4,257)$(22,659)$(15,900)
Net loss per share attributable to common stockholders, basic and diluted$(1.37)$(2.41)$(10.33)$(9.21)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
2,814,798 1,800,286 2,220,734 1,740,072 
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 Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share amounts)
(unaudited)
Convertible
Preferred Stock
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
Deficit
SharesAmountSharesAmount
Balances at January 1, 202017,583,150 $205,339 2,100,203 $2 $21,750 $1,373 $(210,503)$(187,378)
Issuance of Series C-1 convertible preferred stock upon exercise of warrants
213,876 2,260 — — — — — — 
Issuance of common stock upon exercise of stock options
— — 7,164 — 11 — — 11 
Change in shares subject to repurchase— — — — 2 — — 2 
Stock-based compensation expense
— — — — 209 — — 209 
Currency translation adjustment— — — — — 282 — 282 
Change in unrealized losses on marketable securities— — — — — (5)— (5)
Net loss— — — — — — (7,163)(7,163)
Balances at March 31, 202017,797,026 207,599 2,107,367 2 21,972 1,650 (217,666)(194,042)
Issuance of common stock upon exercise of stock options
— — 925 — 1 — — 1 
Change in shares subject to repurchase— — — — 63 — — 63 
Stock-based compensation expense
— — — — 159 — — 159 
Currency translation adjustment— — — — — (34)— (34)
Change in unrealized losses on marketable securities— — — — — (1)— (1)
Net loss— — — — — — (11,911)(11,911)
Balances at June 30, 202017,797,026 207,599 2,108,292 2 22,195 1,615 (229,577)(205,765)
Issuance of common stock upon exercise of stock options
— — 1,703,532 2 2,643 — — 2,645 
Repurchase of early exercised common stock options— — (10,000)— — — —  
Change in shares subject to repurchase— — — — (460)— — (460)
Stock-based compensation expense
— — — — 518 — — 518 
Currency translation adjustment— — — — — 33 — 33 
Net loss— — — — — — (3,860)(3,860)
Balances at September 30, 202017,797,026 $207,599 3,801,824 $4 $24,896 $1,648 $(233,437)$(206,889)
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Convertible
Preferred Stock
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
Deficit
SharesAmountSharesAmount
Balances at January 1, 201912,648,919 $140,535 1,719,446 $2 $21,139 $1,333 $(189,800)$(167,326)
Series G-1 convertible preferred stock issuance costs— (71)— — — — — — 
Issuance of common stock upon exercise of stock options
— — 4,328 — 5 — — 5 
Change in shares subject to repurchase— — — — 5 — — 5 
Common stock retired during the year for no consideration— — (414)— — — —  
Stock-based compensation expense
— — — — 50 — — 50 
Currency translation adjustment— — — — — (17)— (17)
Net loss— — — — — — (6,128)(6,128)
Balances at March 31, 201912,648,919 140,464 1,723,360 2 21,199 1,316 (195,928)(173,411)
Issuance of Series G-1 convertible preferred stock, net of issuance costs of $258
4,934,231 64,875 — — — — — — 
Issuance of common stock upon exercise of stock options
— — 36,500 — 53 — — 53 
Change in shares subject to repurchase— — — — (7)— — (7)
Repurchase of early exercised common stock options— — (812)— — — —  
Stock-based compensation expense— — — — 75 — — 75 
Currency translation adjustment— — — — — 73 — 73 
Net loss— — — — — — (5,571)(5,571)
Balances at June 30, 201917,583,150 205,339 1,759,048 2 21,320 1,389 (201,499)(178,788)
Issuance of common stock upon exercise of stock options
— — 278,794 — 341 — — 341 
Change in shares subject to repurchase— — — — (206)— — (206)
Stock-based compensation expense— — — — 72 — — 72 
Currency translation adjustment— — — — — 71 — 71 
Change in unrealized gains on marketable securities— — — — — 7 — 7 
Net loss— — — — — — (4,335)(4,335)
Balances at September 30, 201917,583,150 $205,339 2,037,842 $2 $21,527 $1,467 $(205,834)$(182,838)
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)
Nine Months Ended September 30,
20202019
Cash flows from operating activities
Net loss$(22,934)$(16,034)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense886 197 
Change in fair value of convertible preferred stock warrant liability (10)
Change in fair value of derivative liabilities(3,209)408 
Allowance for doubtful accounts(7)3 
Inventory write-downs380 250 
Depreciation and amortization expense355 253 
Amortization of debt discount and debt issuance costs901 22 
Write-off of deferred offering costs3,030  
Amortization of premiums and discounts on short-term marketable securities(35)(22)
Gain on extinguishment of convertible note (32)
Non-cash lease expense955 574 
Net changes in operating assets and liabilities:
Accounts receivable336 (2,311)
Inventory(3,944)(2,139)
Prepaid expenses and other current assets412 3 
Other assets71 3 
Accounts payable(166)149 
Accrued liabilities310 2,056 
Income taxes payable(85)63 
Lease liabilities(554)(582)
Deferred tax liability10 (35)
Deferred revenue(83)(110)
Net cash used in operating activities(23,371)(17,294)
Cash flows from investing activities
Purchases of investments (18,966)
Maturities of short-term marketable securities13,605 2,207 
Purchases of property and equipment(218)(499)
Net cash provided by (used in) investing activities13,387 (17,258)
Cash flows from financing activities
Proceeds from borrowing under term loans, net of payment of lender fees and costs16,764  
Proceeds from Credit Agreement527  
Repayment of term loans(17,248) 
Proceeds from the issuance of convertible note, net of payment of lender fees and costs (includes $0 and $6,000 from related party for the nine months ended September 30, 2020 and September 30, 2019, respectively)
32,950 6,000 
Proceeds from Paycheck Protection Program loan2,666  
Repayment of Paycheck Protection Program loan(2,666) 
Debt issuance cost(162) 
Payments of deferred offering costs(2,727)(21)
Proceeds from issuance of Series G-1 convertible preferred stock, net of issuance costs of $329
 39,671 
Proceeds from exercise of warrants for Series C-1 convertible preferred stock2,261  
Proceeds from exercise of common stock options2,722 399 
Payments for the repurchase of early exercised common stock options(21)(12)
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Net cash provided by financing activities35,066 46,037 
Effect of exchange rate changes on cash and cash equivalents188 121 
Net increase in cash and cash equivalents25,270 11,606 
Cash, cash equivalents and restricted cash, at beginning of the period14,767 4,124 
Cash, cash equivalents and restricted cash, at end of the period$40,037 $15,730 
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets:
Cash and cash equivalents39,806 15,730 
Restricted cash231  
Cash, cash equivalents and restricted cash in consolidated balance sheets$40,037 $15,730 
Supplemental non-cash items:
Increases in repurchase rights of common stock$(395)$(208)
Purchases of property and equipment in accounts payable$288 $63 
Accrued interest for convertible note$788 $496 
Issuance of derivative instrument related to convertible notes$3,900 $ 
Conversion of convertible note into Series G-1 convertible preferred stock$ $25,133 
Operating lease right of use asset recorded on the adoption of ASC 842$ $1,181 
Operating lease right of use assets obtained in exchange for new lease liabilities$3,882 $ 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$149 $187 
Cash paid for interest$2,880 $1,061 
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), 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 the Cayman Islands, Germany, Switzerland, Australia, the United Kingdom, the Netherlands, Italy, France and Hong Kong.
Initial Public Offering
On September 30, 2020, the Company’s registration statement on Form S-1 (File No. 333-248635) relating to its initial public offering (“IPO”) of common stock became effective. The IPO closed on October 5, 2020 at which time the Company issued 11,500,000 shares of its common stock at a price of $19.00 per share, which included the issuance of shares in connection with the exercise by the underwriters of their option to purchase up to 1,500,000 additional shares (see Note 15). The Company received an aggregate of $218.5 million gross proceeds, before underwriting discounts, commissions and offering costs, and approximately $201.4 million in net proceeds after deducting underwriting discounts and commissions and offering costs. In addition, upon closing the IPO, all outstanding shares of the Company’s convertible preferred stock converted into 17,797,026 shares of common stock. In connection with the completion of its IPO, on October 5, 2020, the Company’s certificate of incorporation was amended and restated to provide for 200,000,000 authorized shares of common stock with a par value of $0.001 per share and 10,000,000 authorized shares of preferred stock with a par value of $0.001 per share. The unaudited interim condensed consolidated financial statements as of September 30, 2020, including share and per share amounts, do not give effect to the IPO, as it closed subsequent to September 30, 2020.
Liquidity and Going Concern
The Company has incurred operating losses and negative cash flows from operations to date and has an accumulated deficit of $233.4 million as of September 30, 2020. During the nine months ended September 30, 2020 and September 30, 2019, the Company used $23.4 million and $17.3 million of cash in its operating activities, respectively. As of September 30, 2020, the Company had cash and cash equivalents of $39.8 million. Historically, the Company’s activities have been financed through private placements of equity securities and debt. On October 5, 2020, the Company completed an IPO in which the Company issued and sold 11,500,000 shares of its common stock, which includes 1,500,000 shares issued and sold pursuant to the exercise of the underwriters’ option to purchase additional shares, at a public offering price of $19.00 per share, for aggregate gross proceeds of $218.5 million. The Company received approximately $201.4 million in net proceeds after deducting underwriting discounts and commissions and offering costs.
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 and cash equivalents, together with the net proceeds from the IPO, will allow the Company to continue its 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
The Company has been actively monitoring the novel coronavirus, or COVID-19, situation and its impact. In response to the pandemic, numerous state and local jurisdictions have imposed “shelter-in-place” orders, quarantines and other restrictions. In the United States, governmental authorities have recommended, and in certain cases
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

required, that elective, specialty and other procedures and appointments, be suspended or canceled. Similarly, in March 2020, the governor of California, where the Company’s headquarters are located, issued “stay at home” orders limiting non-essential activities, travel and business operations. Such orders or restrictions have resulted in reduced operations at the Company’s headquarters (including manufacturing facility), work stoppages, slowdowns and delays, travel restrictions and cancellation of events and have restricted the efforts of the Company’s sales representatives, thereby significantly and negatively impacting the Company’s operations. These orders and restrictions have significantly decreased the number of procedures performed using the Company’s products and otherwise negatively impacted sales and operations.
The COVID-19 pandemic has negatively impacted the Company’s business, financial condition and results of operations by decreasing and delaying substantially all procedures performed using the its products, and the Company expects the pandemic to continue to negatively impact its business, financial condition and results of operations.
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”).
Reverse Stock Split
On September 22, 2020, the Company effected a 1-for-10 reverse stock split of the Company’s common stock and convertible preferred stock. The par value and authorized shares of common stock were not adjusted as a result of the reverse stock split. All issued and outstanding common stock, convertible preferred stock, stock options and per share amounts contained in the accompanying financial statements and notes to the financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.
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, 2019 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 September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019, 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, 2019 and notes thereto, included in the Company’s final prospectus for the IPO filed with the SEC pursuant to Rule 424(b)(4) on September 30, 2020 (“final prospectus”). 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 September 30, 2020 and condensed consolidated results of operations and cash flows for the three and nine months ended September 30, 2020 and 2019 have been made. The results of operations for the three and nine
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months ended September 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.
Use of Estimates
The preparation of 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 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 equity instruments and equity-linked instruments, valuation of common stock, stock-based compensation, valuation of the convertible preferred stock warrant liability and derivative liability, 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. The convertible preferred stock warrant liability and derivative liabilities are carried at fair value based on unobservable market inputs. 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 and convertible note 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).
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 September 30, 2020 and December 31, 2019, the Company also had cash on deposit with foreign banks of approximately $5.0 million and $5.2 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 nine months ended September 30, 2020 and 2019. 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 September 30, 2020 and December 31, 2019, no customer or distributor accounted for more than 10% of accounts receivable or 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.
Deferred Offering Costs
Deferred offering costs, consisting of legal, accounting and other fees and costs relating to the Company’s planned IPO, are capitalized and recorded on the balance sheet. The deferred offering costs will be offset against the proceeds received upon the closing of the planned IPO. In the event that the Company’s plans for an IPO are
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terminated, all of the deferred offering costs will be written off within operating expenses in the Company’s statements of operations and comprehensive loss. As of December 31, 2019, $1.6 million of deferred offering costs were recorded on the consolidated balance sheet. During the nine months ended September 30, 2020, the Company wrote off deferred offering costs of $3.0 million as, in May 2020, the Company withdrew its registration statement that was filed with the SEC in February 2020. As of September 30, 2020, $1.7 million of deferred offering costs were recorded on the consolidated balance sheet.
Foreign Currency Translation and Transaction Gains and Losses
The functional currencies of the Company’s wholly owned subsidiaries in the Cayman Islands and the Netherlands are the U.S. dollar. 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 consolidated balance sheet. Foreign currency translation adjustments are recorded in other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss and was less than $0.1 million and $0.1 million during the three months ended September 30, 2020 and 2019, respectively, and $0.3 million and $0.1 million during the nine months ended September 30, 2020 and 2019, respectively.
Foreign currency transaction gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive loss and was $(0.1) million and $0.2 million during the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.4 million during the nine months ended September 30, 2020 and 2019, 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, convertible preferred stock, stock options, common stock subject to repurchase related to early exercise of stock options, convertible preferred stock warrants and convertible note 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 as the convertible preferred stock is considered a participating security because it participates in dividends with common stock. The Company also 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 all series of convertible preferred stock and 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
Recently Adopted Accounting Pronouncements
In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU amends the disclosure requirement in ASC 820, Fair Value Measurement, by adding, changing or removing certain disclosures. This ASU applies to all entities that are required under this guidance to provide disclosure about recurring or nonrecurring fair value
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

measurements. The amendments require new disclosures related to: changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements. In addition, there are certain changes in disclosure requirements in the existing guidance. For all entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2018-13 as of January 1, 2020 and the adoption had no material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment. The amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU is effective for public business entities for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company adopted ASU 2017-04 as of January 1, 2020 and the adoption had no material impact on the Company’s consolidated financial statements.
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 August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. This ASU is effective for the Company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this principle on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for public business entities for fiscal years
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU 2019-12 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 , 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 a SRC for fiscal year 2019 and 2020. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements.
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, short-term marketable securities, convertible preferred stock warrant liability and derivative liabilities.
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 and convertible notes approximates their 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.
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)