What changed in this filing

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Item 1. Financial Statements

2020-11-04 compared with 2020-08-04 · 175 added, 127 removed, 736 unchanged (29% of the section changed)

2 unchanged sentences

(amounts in thousands)

September 30,

Current assets

23 unchanged sentences

(amounts in thousands, except share and per share amounts)

September 30,

Liabilities and stockholders' equity

19 unchanged sentences

22,116,291 and 22,031,410

shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

4 unchanged sentences

See accompanying condensed notes to the consolidated financial statements.

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

(amounts in thousands, except share and per share amounts)

Three months ended

Six months ended

Nine months ended

September 30,

Sales revenue

3 unchanged sentences

Cost of sales revenue

Cost of rental revenue, including depreciation of $ 1,221 and $ 1,594 , for the three months ended and $ 2,520 and $ 3,299 for the six months ended, respectively

Cost of rental revenue, including depreciation of $ 1,475 and $ 1,482 , for the three months ended and $ 3,995 and $ 4,781 for the nine months ended, respectively

Total cost of revenue

10 unchanged sentences

Interest income

Other income (expense)

Total other income, net

Income before provision for income taxes

Provision for income taxes

Income (loss) before provision (benefit) for income taxes

Provision (benefit) for income taxes

Net income (loss)

Other comprehensive income (loss), net of tax

5 unchanged sentences

Total other comprehensive income (loss), net of tax

Comprehensive income

Basic net income per share attributable to common stockholders (Note 7)

Diluted net income per share attributable to common stockholders (Note 7)

Weighted-average number of shares used in calculating net income per

Comprehensive income (loss)

Basic net income (loss) per share attributable to common stockholders (Note 7)

Diluted net income (loss) per share attributable to common stockholders (Note 7)

Weighted-average number of shares used in calculating net income (loss) per

share attributable to common stockholders:

4 unchanged sentences

(amounts in thousands, except share amounts)

Three months ended June 30, 2020 and June 30, 2019

Three months ended September 30, 2020 and September 30, 2019

comprehensive

1 unchanged sentence

income (loss)

Balance, March 31, 2019 (unaudited)

Balance, June 30, 2019 (unaudited)

Stock-based compensation

Employee stock purchases

Restricted stock awards issued, net of forfeitures

3 unchanged sentences

Other comprehensive loss

Balance, September 30, 2019 (unaudited)

Balance, June 30, 2020 (unaudited)

Balance, March 31, 2020 (unaudited)

Stock-based compensation

Employee stock purchases

Vesting of restricted stock units

Shares withheld related to net restricted stock settlement

Stock options exercised

Other comprehensive loss

Balance, June 30, 2020 (unaudited)

Six months ended June 30, 2020 and June 30, 2019

Other comprehensive income

Balance, September 30, 2020 (unaudited)

Nine months ended September 30, 2020 and September 30, 2019

comprehensive

9 unchanged sentences

Other comprehensive loss

Balance, June 30, 2019 (unaudited)

Balance, September 30, 2019 (unaudited)

Balance, December 31, 2019

6 unchanged sentences

Other comprehensive income

Balance, June 30, 2020 (unaudited)

Balance, September 30, 2020 (unaudited)

See accompanying condensed notes to the consolidated financial statements.

1 unchanged sentence

(amounts in thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

28 unchanged sentences

Proceeds from sale of former assets

Net cash provided by (used in) investing activities

Payment for acquisition, net of cash acquired

Net cash used in investing activities

(continued on next page)

2 unchanged sentences

(amounts in thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from financing activities

4 unchanged sentences

Effect of exchange rates on cash

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

3 unchanged sentences

Supplemental disclosure of non-cash transactions

Accrued value of earnout related to acquisition

Property and equipment in accounts payable and accrued liabilities

10 unchanged sentences

The Company’s Inogen One systems reduce the patient’s reliance on stationary concentrators and scheduled deliveries of tanks with a finite supply of oxygen, thereby improving patient quality of life and fostering mobility.

Since adopting the Company’s direct-to-consumer rental strategy in 2009, the Company has directly sold or rented more than 875,000 of its Inogen oxygen concentrators as of June 30, 2020.

Since adopting the Company’s direct-to-consumer rental strategy in 2009, the Company has directly sold or rented more than 922,000 of its Inogen oxygen concentrators as of September 30, 2020.

The Company incorporated Inogen Europe Holding B.V., a Dutch limited liability company, on April 13, 2017 .

11 unchanged sentences

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

The results of operations for the three months and six months ended June 30, 2020 shown in this report are not necessarily indicative of results to be expected for the full year ending December 31, 2020.

The results of operations for the three months and nine months ended September 30, 2020 shown in this report are not necessarily indicative of results to be expected for the full year ending December 31, 2020.

In the opinion of the Company’s management, the information contained herein reflects all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the Company’s results of operations, financial position, cash flows and stockholders’ equity.

18 unchanged sentences

The Company considers the nature and substance of the government grant and records the cash payment in accordance with the terms and conditions of the grant.

Income is deferred until all considerations required for receiving the grant are met and is recognized in the consolidated statements of comprehensive income based on the nature of the terms and conditions of the grant.

In the three months ended June 30, 2020, the Company received a grant of $ 6,200 from the Public Health and Social Services Emergency Fund (Relief Fund), which was among the provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act signed into law on March 27, 2020.

During the three months ended June 30, 2020, t he Company recorded $ 5,600 in other income, which was associated with lost revenues from the COVID-19 PHE, and a $ 600 benefit in general and administrative expense due to COVID-19 PHE related costs incurred in the quarter.

Income is deferred until all considerations required for receiving the grant are met and is recognized in the consolidated statements of comprehensive income (loss) based on the nature of the terms and conditions of the grant.

In the nine months ended September 30, 2020, the Company received a grant of $ 6,200 from the Public Health and Social Services Emergency Fund (Relief Fund), which was among the provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act signed into law on March 27, 2020.

During the nine months ended September 30, 2020, t he Company recorded $ 5,300 in other income, which was associated with lost revenues from the COVID-19 PHE, and a $ 900 benefit in general and administrative expense due to COVID-19 PHE related costs incurred in the period.

Recently issued accounting pronouncements not yet adopted

54 unchanged sentences

The consolidated financial and operating results reflect the New Aera operations beginning August 9, 2019.

The following unaudited pro forma information for the three months and six months ended June 30, 2019 presents the revenue and net income assuming the acquisition of New Aera had occurred as of January 1, 2018.

The following unaudited pro forma information for the three months and nine months ended September 30, 2019 presents the revenue and net income assuming the acquisition of New Aera had occurred as of January 1, 2018.

Three months ended

Six months ended

June 30, 2019

Nine months ended

September 30, 2019

Total revenue

21 unchanged sentences

The following table summarizes fair value measurements by level for the assets measured at fair value on a recurring basis for cash, cash equivalents and marketable securities:

As of June 30, 2020

As of September 30, 2020

Money market accounts

Corporate bonds

Treasury securities

As of December 31, 2019

9 unchanged sentences

Changes in the fair value of these forward contracts designed as cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity and are recognized in the consolidated statements of comprehensive income (loss) during the period which approximates the time the corresponding sales occur.

The Company may also enter into foreign exchange contracts that are not

The Company may also enter into foreign exchange contracts that are not designated as hedging instruments for financial accounting purposes.

These contracts are generally entered into to offset the gains and losses on certain asset

Condensed Notes to the Consolidated Financial Statements (continued)

(amounts in thousands, except share and per share amounts)

designated as hedging instruments for financial accounting purposes.

These contracts are generally entered into to offset the gains and losses on certain asset and liability balances until the expected time of repayment.

and liability balances until the expected time of repayment.

Accordingly, any gains or losses resulting from changes in the fair value of the non-designated contracts are reported in other expense, net in the consolidated statements of comprehensive income.

1 unchanged sentence

The Company records the assets or liabilities associated with derivative instruments and hedging activities at fair value based on Level 2 inputs in other current assets or other current liabilities, respectively, in the consolidated balance sheet.

The Company had a related receivable of $ 64 and a related payable of $ 514 as of June 30, 2020 and December 31, 2019, respectively.

The Company had a related payable of $ 470 and $ 514 as of September 30, 2020 and December 31, 2019, respectively.

The Company classifies the foreign currency derivative instruments within Level 2 in the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of whether it is designated and qualifies for hedge accounting.

16 unchanged sentences

Other comprehensive income (loss)

Balance as of June 30, 2020

Balance as of September 30, 2020

Comprehensive income (loss) is the total net earnings and all other non-owner changes in equity.

10 unchanged sentences

(amounts in thousands, except share and per share amounts)

The following table provides quantitative information about Level 3 inputs for fair value measurement of the earnout liability as of June 30, 2020 and December 31, 2019.

The following table provides quantitative information about Level 3 inputs for fair value measurement of the earnout liability as of September 30, 2020 and December 31, 2019.

Significant increases or decreases in these inputs in isolation could result in a significant impact on our fair value measurement:

Simulation input

June 30, 2020

September 30, 2020

December 31, 2019

4 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Balance at beginning of period

14 unchanged sentences

Cash, cash equivalents, and marketable securities consist of the following:

September 30,

Cash and cash equivalents

25 unchanged sentences

and when recording the allowances for rental reserve adjustments and doubtful accounts, the rental revenue adjustments account (contra rental revenue account) is charged.

As of June 30, 2020 and December 31, 2019, included in accounts receivable on the consolidated balance sheets were earned but unbilled receivables of $ 1,520 and $ 590 , respectively.

As of September 30, 2020 and December 31, 2019, included in accounts receivable on the consolidated balance sheets were earned but unbilled receivables of $ 1,659 and $ 590 , respectively.

These balances reflect gross unbilled receivables prior to any allowances for adjustments and write-offs.

3 unchanged sentences

As additional information becomes known, the Company adjusts its assumptions accordingly to change its estimate of the allowance.

Gross accounts receivable balance concentrations by major category as of June 30, 2020 and December 31, 2019 were as follows:

Gross accounts receivable balance concentrations by major category as of September 30, 2020 and December 31, 2019 were as follows:

September 30,

Gross accounts receivable

1 unchanged sentence

Total gross accounts receivable

Condensed Notes to the Consolidated Financial Statements (continued)

(amounts in thousands, except share and per share amounts)

Net accounts receivable (gross accounts receivable, net of allowances) balance concentrations by major category as of June 30, 2020 and December 31, 2019 were as follows:

Net accounts receivable (gross accounts receivable, net of allowances) balance concentrations by major category as of September 30, 2020 and December 31, 2019 were as follows:

September 30,

Net accounts receivable

1 unchanged sentence

Total net accounts receivable

Condensed Notes to the Consolidated Financial Statements (continued)

(amounts in thousands, except share and per share amounts)

Rental includes Medicare, Medicaid/other government, private insurance and patient pay.

Business-to-business receivables included one customer with a gross accounts receivable balance of $ 5,866 and $ 10,695 as of June 30, 2020 and December 31, 2019, respectively.

Business-to-business receivables included one customer with a gross accounts receivable balance of $ 5,568 and $ 10,695 as of September 30, 2020 and December 31, 2019, respectively.

This customer received extended payment terms through a direct financing plan offered.

The Company also has a credit insurance policy in place, which allocated up to $ 20,000 in coverage as of June 30, 2020 and allocated up to $ 20,000 in coverage as of December 31, 2019 for this customer with a $ 400 deductible and 10 % retention.

The following tables set forth the accounts receivable allowances as of June 30, 2020 and December 31, 2019:

The Company also has a credit insurance policy in place, which allocated up to $ 10,000 in coverage as of September 30, 2020 and allocated up to $ 20,000 in coverage as of December 31, 2019 for this customer with a $ 400 deductible and 10 % retention.

The following tables set forth the accounts receivable allowances as of September 30, 2020 and December 31, 2019:

September 30,

Allowances - accounts receivable

13 unchanged sentences

The Company also sells its products direct-to-consumers on a primarily prepayment basis.

One single customer represented more than 10% of the Company’s total revenue for the six months ended June 30, 2020, and no single customer represented more than 10% of the Company’s total revenue for the six months ended June 30, 2019.

Two customers each represented more than 10% of the Company’s net accounts receivable balance with accounts receivable balances of $ 5,866 and $ 8,900 , respectively, as of June 30, 2020, and $ 10,695 and $ 5,228 , respectively, as of December 31, 2019.

One single customer represented more than 10% of the Company’s total revenue for the nine months ended September 30, 2020, and no single customer represented more than 10% of the Company’s total revenue for the nine months ended September 30, 2019.

Two customers each represented more than 10% of the Company’s net accounts receivable balance with accounts receivable balances of $ 9,386 and $ 5,568 , respectively, as of September 30, 2020, and $ 10,695 and $ 5,228 , respectively, as of December 31, 2019.

The Company currently purchases raw materials from a limited number of vendors, which resulted in a concentration of three major vendors.

The three major vendors supply the Company with raw materials used to manufacture the Company’s products.

For the six months ended June 30, 2020, the Company’s three major vendors accounted for 21.4 %, 10.6 %, and 10.4 %, respectively, of total raw material purchases.

For the six months ended June 30, 2019, the Company’s three major vendors accounted for 21.5 %, 13.1 % and 9.3 %, respectively, of total raw material purchases.

Condensed Notes to the Consolidated Financial Statements (continued)

(amounts in thousands, except share and per share amounts)

For the nine months ended September 30, 2020, the Company’s three major vendors accounted for 20.7 %, 11.1 %, and 9.7 %, respectively, of total raw material purchases.

For the nine months ended September 30, 2019, the Company’s three major vendors accounted for 22.1 %, 13.8 % and 9.7 %, respectively, of total raw material purchases.

A portion of revenue is earned from sales outside the United States.

Approximately 83.4 % and 70.3 % of the non-U.S.

revenue for the three months ended June 30, 2020 and June 30, 2019, respectively, were invoiced in Euros.

revenue for the three months ended September 30, 2020 and September 30, 2019, respectively, were invoiced in Euros.

Approximately 75.6 % and 71.2 % of the non-U.S.

revenue for the six months ended June 30, 2020 and June 30, 2019, respectively, were invoiced in Euros.

revenue for the nine months ended September 30, 2020 and September 30, 2019, respectively, were invoiced in Euros.

A breakdown of the Company’s revenue from U.S.

sources for the three and six months ended June 30, 2020 and June 30, 2019, respectively, is as follows:

sources for the three and nine months ended September 30, 2020 and September 30, 2019, respectively, is as follows:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Total revenue

Condensed Notes to the Consolidated Financial Statements (continued)

(amounts in thousands, except share and per share amounts)

Inventories are stated at the lower of cost and net realizable value.

1 unchanged sentence

The Company records adjustments at least quarterly to inventory for potentially excess, obsolete, slow-moving or impaired items.

The Company recorded noncurrent inventory related to inventories that are expected to be realized or consumed after one year of $ 2,091 and $ 1,076 as of June 30, 2020 and December 31, 2019, respectively.

The Company recorded noncurrent inventory related to inventories that are expected to be realized or consumed after one year of $ 2,459 and $ 1,076 as of September 30, 2020 and December 31, 2019, respectively.

Noncurrent inventories are primarily related to raw materials purchased in bulk to support long-term expected repairs to reduce costs and are classified in other assets.

During the six months ended June 30, 2020 and June 30, 2019, $ 1,193 and $ 670 , respectively, of inventory was transferred to rental equipment and was considered a noncash transaction in the production and purchase of rental equipment on the consolidated statements of cash flow.

During the nine months ended September 30, 2020 and September 30, 2019, $ 1,795 and $ 798 , respectively, of inventory was transferred to rental equipment and was considered a noncash transaction in the production and purchase of rental equipment on the consolidated statements of cash flow.

Inventories that are considered current consist of the following:

September 30,

Raw materials and work-in-progress

12 unchanged sentences

Repair and maintenance costs on rental equipment are included in cost of rental revenue on the consolidated statements of comprehensive income.

Repair and maintenance expense, which includes labor, parts and freight, for rental equipment was $ 598 and $ 701 for the three months ended June 30, 2020 and June 30, 2019, respectively, and $ 1,123 and $ 1,363 for the six months ended June 30, 2020 and June 30, 2019, respectively.

Repair and maintenance expense, which includes labor, parts and freight, for rental equipment was $ 653 and $ 938 for the three months ended September 30, 2020 and September 30, 2019, respectively, and $ 1,776 and $ 2,301 for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Included within property and equipment is construction in process, primarily related to the design and engineering of tooling, jigs and other machinery.

2 unchanged sentences

therefore, no depreciation or amortization was recognized for these items in the respective periods.

Condensed Notes to the Consolidated Financial Statements (continued)

(amounts in thousands, except share and per share amounts)

Depreciation and amortization expense related to rental equipment and other property and equipment are summarized below for the three and six months ended June 30, 2020 and June 30, 2019, respectively.

Depreciation and amortization expense related to rental equipment and other property and equipment are summarized below for the three and nine months ended September 30, 2020 and September 30, 2019, respectively.

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Rental equipment

1 unchanged sentence

Total depreciation and amortization

Property and equipment and rental equipment with associated accumulated depreciation is summarized below as of June 30, 2020 and December 31, 2019, respectively.

Condensed Notes to the Consolidated Financial Statements (continued)

(amounts in thousands, except share and per share amounts)

Property and equipment and rental equipment with associated accumulated depreciation is summarized below as of September 30, 2020 and December 31, 2019, respectively.

September 30,

Property and equipment

14 unchanged sentences

The Company periodically reviews the carrying value of long-lived assets to determine whether or not impairment to such value has occurred.

No impairments were recorded as of June 30, 2020 and June 30, 2019.

The changes in the carrying amount of goodwill for the six months ended June 30, 2020 were as follows:

No impairments were recorded as of September 30, 2020 and September 30, 2019.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2020 were as follows:

Balance as of December 31, 2019

Translation adjustment

Balance as of June 30, 2020

Balance as of September 30, 2020

Intangible assets

There were no impairments recorded related to the Company’s intangible assets as of June 30, 2020 and June 30, 2019.

Amortization expense for intangible assets for the three months ended June 30, 2020 and June 30, 2019 was $ 2,250 and $ 324 , respectively, and for the six months ended June 30, 2020 and June 30, 2019 was $ 4,492 and $ 652 , respectively.

There were no impairments recorded related to the Company’s intangible assets as of September 30, 2020 and September 30, 2019.

Amortization expense for intangible assets for the three months ended September 30, 2020 and September 30, 2019 was $ 2,255 and $ 1,269 , respectively, and for the nine months ended September 30, 2020 and September 30, 2019 was $ 6,747 and $ 1,921 , respectively.

Condensed Notes to the Consolidated Financial Statements (continued)

1 unchanged sentence

The following tables represent the changes in net carrying values of intangible assets as of the respective dates:

June 30, 2020

September 30, 2020

Patents and websites

4 unchanged sentences

Annual estimated amortization expense for each of the succeeding fiscal years is as follows:

September 30,

Remaining 3 months of 2020

Current liabilities

Accounts payable and accrued expenses as of June 30, 2020 and December 31, 2019 consisted of the following:

Accounts payable and accrued expenses as of September 30, 2020 and December 31, 2019 consisted of the following:

September 30,

Accounts payable

6 unchanged sentences

(amounts in thousands, except share and per share amounts)

Accrued payroll as of June 30, 2020 and December 31, 2019 consisted of the following:

Accrued payroll as of September 30, 2020 and December 31, 2019 consisted of the following:

September 30,

Accrued bonuses

9 unchanged sentences

T he Company leases a property owned by a related party.

Operating lease cost for the property was $ 8 and $ 16 for the three and six months ended June 30, 2020, respectively, which was included in the total operating lease cost.

Operating lease cost for the property was $ 8 and $ 25 for the three and nine months ended September 30, 2020, respectively, which was included in the total operating lease cost.

Information related to the Company's right-of-use assets and related operating lease liabilities were as follows:

Six months ended

Nine months ended

September 30,

Cash paid for operating lease liabilities

3 unchanged sentences

Weighted-average discount rate

Maturities of lease liabilities due in the 12-month period ending June 30,

Maturities of lease liabilities due in the 12-month period ending September 30,

Less imputed interest

5 unchanged sentences

(amounts in thousands, except share and per share amounts)

As of June 30, 2020, the Company has additional operating leases for its corporate headquarters in California and industrial space in Texas that have not yet commenced, with total minimum lease payments of $ 21,548 .

As of September 30, 2020, the Company has additional operating leases for its corporate headquarters in California and industrial space in Texas that have not yet commenced, with total minimum lease payments of $ 21,433 .

Lease payments for its corporate headquarters will increase annually by the lesser of the change, if any, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S.

1 unchanged sentence

Lease payments for the Company’s industrial space in Texas will increase annually by two and one-half percent ( 2.5 %) at each annual adjustment date thereafter .

These operating leases are estimated to commence in the first quarter of 2021 with a lease term of 10 to 11 years .

These operating leases are estimated to commence in the first quarter of 2021 with a lease term of approximately 10 years.

The table above excludes lease payments that were not fixed at commencement or modification.

Earnings per share

Earnings per share (EPS) is computed in accordance with ASC 260 —Earnings per Share and is calculated using the weighted-average number of common shares outstanding during each period.

Earnings (loss) per share

Earnings (loss) per share (EPS) is computed in accordance with ASC 260 —Earnings per Share and is calculated using the weighted-average number of common shares outstanding during each period.

Diluted EPS assumes the conversion, exercise or issuance of all potential common stock equivalents (which can include dilution of outstanding stock options, restricted stock units and restricted stock awards) unless the effect is to reduce a loss or increase the income per share.

For purposes of this calculation, common stock subject to repurchase by the Company, options, and other dilutive awards are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.

Basic earnings per share is calculated using the Company’s weighted-average outstanding common shares.

Diluted earnings per share is calculated using the Company’s weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.

Basic earnings (loss) per share is calculated using the Company’s weighted-average outstanding common shares.

Diluted earnings (loss) per share is calculated using the Company’s weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.

The computation of EPS is as follows:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Numerator—basic and diluted:

Net income (loss)

Weighted-average common shares - basic common stock (1)

Weighted-average common shares - diluted common stock

Net income per share - basic common stock

Net income per share - diluted common stock

Net income (loss) per share - basic common stock

Net income (loss) per share - diluted common stock (2)

Denominator calculation from basic to diluted:

11 unchanged sentences

however, such dividends are not paid until the restrictions lapse.

The computations of diluted net income attributable to common stockholders exclude common stock options, restricted stock units, and restricted stock awards, which were anti-dilutive for the three and six months ended June 30, 2020 and June 30, 2019.

Due to a net loss for the three and nine months ended September 30, 2020, dilutive loss per share is the same as basic.

Condensed Notes to the Consolidated Financial Statements (continued)

19 unchanged sentences

The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act did not have a material tax impact on the Company’s consolidated financial statement presentation or results as of and for the three and six months ended June 30, 2020.

The CARES Act did not have a material tax impact on the Company’s consolidated financial statement presentation or results as of and for the three and nine months ended September 30, 2020.

The Company is continuing to assess the future implications of these provisions within the CARES Act.

1 unchanged sentence

The Company has a 2002 Stock Incentive Plan (2002 Plan) as amended, under which the Company granted options to purchase shares of its common stock.

As of June 30, 2020, options to purchase 333 shares of common stock remained outstanding under the 2002 Plan.

As of September 30, 2020, options to purchase 333 shares of common stock remained outstanding under the 2002 Plan.

The 2002 Plan was terminated in March 2012 in connection with the adoption of the 2012 Plan, and, accordingly, no new options are available for issuance under this plan.

1 unchanged sentence

The Company has a 2012 Equity Incentive Plan (2012 Plan) under which the Company granted options to purchase shares of its common stock.

As of June 30, 2020, options to purchase 138,736 shares of common stock remained outstanding under the 2012 Plan.

As of September 30, 2020, options to purchase 138,736 shares of common stock remained outstanding under the 2012 Plan.

The 2012 Plan was terminated in connection with the Company’s initial public offering in February 2014, and accordingly, no new options are available for issuance under this plan.

3 unchanged sentences

(amounts in thousands, except share and per share amounts)

As of June 30, 2020, awards with respect to 1,212,795 shares of the Company’s common stock were outstanding, and 1,620,935 shares of common stock remained available for issuance under the 2014 Plan.

As of September 30, 2020, awards with respect to 1,206,292 shares of the Company’s common stock were outstanding, and 1,609,397 shares of common stock remained available for issuance under the 2014 Plan.

The shares available for issuance under the 2014 Plan will be increased by any shares returned to the 2002 Plan, 2012 Plan and the 2014 Plan as a result of expiration or termination of awards (provided that the maximum number of shares that may be added to the 2014 Plan pursuant to such previously granted awards under the 2002 Plan and 2012 Plan is 2,328,569 shares).

7 unchanged sentences

Options have been granted to employees, directors and consultants of the Company, as determined by the board of directors, at the deemed fair market value of the shares underlying the options at the date of grant.

The activity for stock options under the Company’s stock plans for the six months ended June 30, 2020 is as follows:

The activity for stock options under the Company’s stock plans for the nine months ended September 30, 2020 is as follows:

Outstanding as of December 31, 2019

Outstanding as of June 30, 2020

Vested and exercisable as of June 30, 2020

Vested and expected to vest as of June 30, 2020

The total intrinsic value of options exercised during the six months ended June 30, 2020 and June 30, 2019 was $ 269 and $ 6,870 , respectively.

As of June 30, 2020, all stock-based compensation expense for options granted under the Plans was recognized.

Outstanding as of September 30, 2020

Vested and exercisable as of September 30, 2020

Vested and expected to vest as of September 30, 2020

The total intrinsic value of options exercised during the nine months ended September 30, 2020 and September 30, 2019 was $ 269 and $ 7,017 , respectively.

As of September 30, 2020, all stock-based compensation expense for options granted under the Plans was recognized.

Stock incentive awards

7 unchanged sentences

(amounts in thousands, except share and per share amounts)

Stock Awards activity for the six months ended June 30, 2020 is summarized below:

Stock Awards activity for the nine months ended September 30, 2020 is summarized below:

Restricted stock units

1 unchanged sentence

Forfeited/canceled

Unvested restricted stock units as of June 30, 2020 (1)

Unvested restricted stock units as of September 30, 2020 (1)

Unvested and expected to vest restricted stock units outstanding as

of June 30, 2020

of September 30, 2020

Restricted stock awards

1 unchanged sentence

Forfeited/canceled

Unvested restricted stock awards outstanding as of June 30, 2020 (1)

Unvested restricted stock awards outstanding as of September 30, 2020 (1)

Unvested and expected to vest restricted stock awards outstanding as

of June 30, 2020

of September 30, 2020

Outstanding restricted stock units and restricted stock awards are based on the maximum payout of the targeted number of shares.

As of June 30, 2020, the unrecognized compensation cost related to unvested employee restricted stock units and restricted stock awards was $ 16,438 , excluding estimated forfeitures.

As of September 30, 2020, the unrecognized compensation cost related to unvested employee restricted stock units and restricted stock awards was $ 14,971 , excluding estimated forfeitures.

This amount is expected to be recognized over a weighted-average period of 2.6 years.

6 unchanged sentences

The offering periods are currently approximately six months in length beginning on the first business day on or after March 1 and September 1 of each year and ending on the first business day on or after September 1 and March 1 approximately six months later.

As of June 30, 2020, a total of 670,678 shares of common stock were available for sale pursuant to the ESPP.

As of September 30, 2020, a total of 630,165 shares of common stock were available for sale pursuant to the ESPP.

Condensed Notes to the Consolidated Financial Statements (continued)

6 unchanged sentences

Stock-based compensation

Stock-based compensation expense recognized for the three and six months ended June 30, 2020 and June 30, 2019, was as follows:

Stock-based compensation expense recognized for the three and nine months ended September 30, 2020 and September 30, 2019, was as follows:

Three months ended

Six months ended

Nine months ended

September 30,

Stock-based compensation expense by type of award:

4 unchanged sentences

Employee stock-based compensation expense was calculated based on awards of stock options, restricted stock units and restricted stock awards ultimately expected to vest based on the Company’s historical award cancellations.

The employee stock-based compensation expense recognized for the six months ended June 30, 2020 and June 30, 2019 has been reduced for estimated forfeitures of stock option plan awards at a rate of 7.3 % and 7.3 %, respectively.

The employee stock-based compensation expense recognized for the nine months ended September 30, 2020 and September 30, 2019 has been reduced for estimated forfeitures of stock option plan awards at a rate of 7.3 % and 7.3 %, respectively.

ASC 718 – Compensation-Stock Compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

For the three and six months ended June 30, 2020 and June 30, 2019, respectively, stock-based compensation expense recognized under ASC 718, included in cost of revenue, research and development expense, sales and marketing expense, and general and administrative expense was as follows:

For the three and nine months ended September 30, 2020 and September 30, 2019, respectively, stock-based compensation expense recognized under ASC 718, included in cost of revenue, research and development expense, sales and marketing expense, and general and administrative expense was as follows:

Three months ended

Six months ended

Nine months ended

September 30,

Cost of revenue

8 unchanged sentences

The Company suspended its 401(k) match, effective July 1, 2020.

The Company contributed $ 459 and $ 505 , net of forfeitures, to the 401(k) plan for the six months ended June 30, 2020 and June 30, 2019, respectively.

The Company contributed $ 455 and $ 695 , net of forfeitures, to the 401(k) plan for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Condensed Notes to the Consolidated Financial Statements (continued)

3 unchanged sentences

The Company enters into non-cancelable contractual obligations for software licenses and maintenance agreements.

As of June 30, 2020, the minimum aggregate payments due under specified non-cancelable contractual obligations are summarized as follows:

As of September 30, 2020, the minimum aggregate payments due under specified non-cancelable contractual obligations are summarized as follows:

Non-cancelable

1 unchanged sentence

Purchase obligations

The Company had approximately $ 68,200 of outstanding purchase orders with its outside vendors and suppliers as of June 30, 2020.

The Company had approximately $ 56,500 of outstanding purchase orders with its outside vendors and suppliers as of September 30, 2020.

Warranty obligations

The following table identifies the changes in the Company’s aggregate product warranty liabilities for the six and twelve-month periods ended June 30, 2020 and December 31, 2019, respectively:

The following table identifies the changes in the Company’s aggregate product warranty liabilities for the nine and twelve-month periods ended September 30, 2020 and December 31, 2019, respectively:

September 30,

Product warranty liability at beginning of period

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The contract with the customer states the final terms of the sale, including the description, quantity, and price of each product or service purchase.

The increase in deferred revenue related to lifetime warranties for the six months ended June 30, 2020 was primarily driven by $ 2,845 of payments received in advance of satisfying performance obligations, partially offset by $ 2,594 of revenue recognized that were included in the deferred revenue balances as of December 31, 2019.

Deferred revenue related to lifetime warranties was $ 17,979 and $ 17,728 as of June 30, 2020 and December 31, 2019, respectively, and is classified within deferred revenue – current and deferred revenue – noncurrent in the consolidated balance sheet.

The increase in deferred revenue related to lifetime warranties for the nine months ended September 30, 2020 was primarily driven by $ 3,980 of payments received in advance of satisfying performance obligations, partially offset by $ 3,901 of revenue recognized that were included in the deferred revenue balances as of December 31, 2019.

Deferred revenue related to lifetime warranties was $ 17,807 and $ 17,728 as of September 30, 2020 and December 31, 2019, respectively, and is classified within deferred revenue – current and deferred revenue – noncurrent in the consolidated balance sheet.

Legislation and HIPAA

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On the same day, Breathe re-filed the ‘250 patent infringement claims in the United States District Court for the Central District of California (C.D.

The Company intends to vigorously defend itself against the allegations in both lawsuits.

The Company recorded a contingent liability of $ 6,000 during the three months ended June 30, 2020.

The related payable was recorded in accounts payable and accrued expenses and receivable from the New Aera acquisition escrow account in prepaid expenses and other current assets as of June 30, 2020.

On August 17, 2020, the court in the N.D.

Lawsuit ordered that Breathe’s claims be arbitrated, with the sole exception of the correction of inventorship claim, which the court ordered be stayed pending completion of the arbitration on the other claims.

On September 4, 2020, Breathe filed a demand for arbitration with the American Arbitration Association, in which Breathe reiterated the claims it filed in the N.D.

The Company intends to vigorously defend itself against the allegations in both lawsuits and in the arbitration.

The Company recorded a contingent liability of $ 7,000 during the nine months ended September 30, 2020.

The related payable was recorded in accounts payable and accrued expenses and receivable from the New Aera acquisition escrow account in prepaid expenses and other current assets as of September 30, 2020.

Securities class action and derivative lawsuits

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On January 23, 2020, the defendants filed a motion to dismiss the second amended complaint.

On September 2, 2020, the court denied the defendants’ motion to dismiss without prejudice and instructed defendants to file another motion to dismiss if the parties are unable to resolve the issues relating to the second amended complaint.

The Company filed its motion to dismiss on October 28, 2020.

The Company intends to vigorously defend itself against these allegations.

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On July 8, 2020, the court ordered that the consolidated action be stayed pending the resolution of the motion to dismiss in the securities class action, In re Inogen, Inc., Sec.

Department of Health and Human Services and the Centers for Medicare and Medicaid Services lawsuit

On September 21, 2020, Inogen filed a lawsuit against defendants, Alex M.

Azar, Secretary of the Department of Health and Human Services (HHS), in his official capacity, Seema Verma, Administrator of the Centers for Medicare and Medicaid Services (CMS), in her official capacity and Palmetto GBA, LLC.

The lawsuit seeks to invalidate the defendants’ arbitrary and capricious decision to retract a valid HCPCS code to Inogen’s Tidal Assist Ventilator, thereby eliminating reimbursements for the ventilator, in violation of the Administrative Procedures Act (5 U.S.C.

§§ 551 , et seq.

Further, CMS’s failure to provide notice and the opportunity to comment on a change in HCPCS code verification for the Sidekick Tidal Assist Ventilator and similar devices constitutes a violation of the procedural right provided under the Medicare Act (42 U.S.C.

§§ 1395hh(a)(2)), and Inogen’s due process rights.

Other litigation

3 unchanged sentences

Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

Condensed Notes to the Consolidated Financial Statements (continued)

(amounts in thousands, except share and per share amounts)

Foreign currency exchange contracts and hedging

As of June 30, 2020 and June 30, 2019, the Company’s total non-designated and designated derivative contracts had notional amounts totaling approximately $ 3,152 and $ 12,278 , respectively, and $ 2,388 and $ 8,926 , respectively.

These contracts were comprised of offsetting contracts with the same counterparty, each expires within one to six months .

During the six months ended June 30, 2020 and June 30, 2019, these contracts had, net of tax, an unrealized gain of $ 390 and an unrealized loss of $ 76 , respectively.

As of September 30, 2020 and September 30, 2019, the Company’s total non-designated and designated derivative contracts had notional amounts totaling approximately $ 2,221 and $ 1,176 , respectively, and $ 20,805 and $ 4,105 , respectively.

These contracts were comprised of offsetting contracts with the same counterparty, each expires within one to fifteen months .

During the nine months ended September 30, 2020 and September 30, 2019, these contracts had, net of tax, unrealized gains of $ 95 and unrealized losses of $ 158 , respectively.

The nonperformance risk of the Company and the counterparty did not have a material impact on the fair value of the derivatives.

During the six months ended June 30, 2020 and June 30, 2019, there were no ineffective portions relating to these hedges and the hedges remained effective through their respective settlement dates.

As of June 30, 2020, the Company had five designated hedges and one non-designated hedge.

As of June 30, 2019, the Company had thirteen designated hedges and three non-designated hedges.

During the nine months ended September 30, 2020 and September 30, 2019, there were no ineffective portions relating to these hedges and the hedges remained effective through their respective settlement dates.

As of September 30, 2020, the Company had nineteen designated hedges and one non-designated hedge.

As of September 30, 2019, the Company had five designated hedges and two non-designated hedges.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements