Inogen Inc 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures The Company maintains a system of disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are designed to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported accurately and completely within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, among other processes, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions over time, or that the degree of compliance with the policies and procedures may deteriorate. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based upon the evaluation described above, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level. Changes in internal controls over financial reporting There has been no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 89 Limitations on effectiveness of controls In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected. Management’s report on internal control over financial reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO). Based on our evaluation under the COSO framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by our independent registered public accounting firm, Deloitte & Touche LLP, as stated in their report, which appears herein. 90 Report of independent registered public accounting firm To the stockholders and the Board of Directors of Inogen, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Inogen, Inc. and subsidiary (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO . We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021 of the Company and our report dated February 24, 2022, expressed an unqualified opinion on those financial statements . Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB . We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion . Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements . Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate . /s/ DELOITTE & TOUCHE LLP Los Angeles, California February 24, 2022 91 ITEM 9B. OTHER INFORMATION Annual Meeting Our annual meeting of stockholders will be held at 10:00 a.m. Pacific Time on Wednesday, June 8, 2022, as a virtual meeting. Holders of record at the close of business on Monday, April 11, 2022, will be entitled to vote at the meeting. 2014 Equity Incentive Plan and 2014 Employee Stock Purchase Plan “Evergreen” Determination For 2022, our board of directors exercised its authority to not increase the shares available for issuance pursuant to the “evergreen” provisions under our 2014 Equity Incentive Plan and our 2014 Employee Stock Purchase Plan in 2020. Refer to Note 7 – Stockholders’ Equity of the Notes included in Part II, Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further discussion of the annual share increase provisions of our 2014 Equity Incentive Plan and our 2014 Employee Stock Purchase Plan. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 92 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information called for by this item will be set forth in our Proxy Statement for the Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021 (the “Proxy Statement”) and is incorporated herein by reference. Our board of directors has adopted a Code of Ethics and Conduct that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. The full text of our Code of Ethics and Conduct is posted on the investor relations page on our website which is located at http://investor.inogen.com . We will post any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website. ITEM 11. EXECUTIVE COMPENSATION The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by reference. 93 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this Annual Report on Form 10-K: 1. Financial Statements The consolidated financial statements listed in the accompanying index (page F-1) to the consolidated financial statements are filed as part of this Annual Report on Form 10-K. 2. Financial Statement Schedules See Schedule II – Valuation and Qualifying Accounts and Reserves included herein. All other schedules have been omitted because the information either has been shown in the financial statements or notes thereto or is not applicable or required under this section. (b) Exhibits Exhibits are filed as part of this Annual Report on Form 10-K and are hereby incorporated by reference. Refer to Exhibit Index included herein. ITEM 16. FORM 10-K SUMMARY Not applicable. 94 Inogen, Inc. Index to Financial Statements and Financial Statement Schedule Report of Independent Registered Public Accounting Firm F-2 Financial Statements Consolidated Balance Sheets as of December 31, 2021 and 2020 F-4 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019 F-6 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019 F-7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 F-8 Notes to the Consolidated Financial Statements F-10 Financial Statement Schedule Valuation and Qualifying Accounts for the Years Ended December 31, 2021, 2020 and 2019 F-36 F-1 Report of independent registered public accounting firm To the stockholders and the Board of Directors of Inogen, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Inogen, Inc. and subsidiary (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America . We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting . Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB . We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion . Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Sales Revenue (Amounts Deferred for Lifetime Warranty) – Refer to Note 2 to the financial statements Critical Audit Matter Description The Company offers a lifetime warranty for direct-to-consumer sales of its oxygen concentrators. For a fixed price, the Company agrees to provide a fully functional oxygen concentrator for the remaining life of the patient. Lifetime warranties are only offered to patients upon the initial sale of oxygen concentrators directly from the Company and are non-transferable. Lifetime warranties are considered to be a distinct performance obligation that are accounted for separately from its sale of oxygen concentrators with a standard warranty of three years. The revenue is allocated to the distinct lifetime warranty performance obligation based on a relative stand-alone selling price (SSP) method. The Company has vendor-specific objective evidence of the selling price for its equipment. To determine the selling price of the lifetime warranty, the Company uses its best estimate of the SSP for the distinct performance obligation as the lifetime warranty is neither separately priced nor is the selling price available through third-party evidence. To estimate the selling price associated with the lifetime warranties, management considers the profit margins of service revenue, the average estimated cost of lifetime warranties and the price of extended warranties. Revenue from the distinct lifetime warranty is deferred after the delivery of the equipment and recognized based on an estimated mortality rate over five years, which is the estimated performance period of the contract based on the average patient life expectancy. Total deferred revenue related to the lifetime warranty performance obligation totaled $18.0 million at December 31, 2021. F-2 Determining the estimated SSP requires significant judgment by management, which is informed by considering Company specific and external data. The service period used to amortize the deferred revenue also requires significant management judgment as the Company has limited historical experience and the determination of patient life expectancy is subjective in nature. Given the lack of stand-alone transactions together with the limited amount of historical data available for such offering, performing audit procedures to evaluate the estimated SSP and the service period for lifetime warranty required high degree of auditor judgment and an increased extent of effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s judgments regarding the stand-alone selling price and deferred revenue service period included the following, among others: • We tested the effectiveness of controls over deferred revenue for the lifetime warranty, including controls over the underlying data utilized and the selection of the stand-alone selling price and the deferred revenue service period. • We evaluated the methodology used by management to develop the stand-alone selling price and independently estimated the stand-alone selling price selected by management. In performing these procedures, we compared the stand-alone selling price selected by management to the independent estimate, which utilized external evidence of similar term extended warranties for oxygen concentrators and the Company’s profit margins. • We evaluated the reasonableness of the deferred revenue service period by comparing to patient average life expectancy in medical and other industry publications. We further evaluated the realization of deferred revenue by evaluating the appropriateness of the underlying mortality data. /s/ DELOITTE & TOUCHE LLP Los Angeles, California February 24, 2022 We have served as the Company’s auditor since 2015. F-3 Inogen, Inc. Consolidated Balance Sheets (amounts in thousands) December 31, 2021 2020 Assets Current assets Cash and cash equivalents $ 235,524 $ 211,962 Marketable securities 9,989 19,257 Accounts receivable, net 24,452 29,717 Inventories, net 31,873 24,815 Income tax receivable 1,343 2,048 Prepaid expenses and other current assets 26,005 17,898 Total current assets 329,186 305,697 Property and equipment Rental equipment, net 59,073 46,953 Manufacturing equipment and tooling 12,050 10,361 Computer equipment and software 8,585 7,356 Furniture and equipment 3,167 2,293 Leasehold improvements 5,956 4,592 Land and building 125 125 Construction in process 1,639 2,344 Total property and equipment 90,595 74,024 Less accumulated depreciation ( 51,669 ) ( 45,794 ) Property and equipment, net 38,926 28,230 Goodwill 32,979 33,165 Intangible assets, net 60,147 68,797 Operating lease right-of-use asset 24,912 8,827 Deferred tax asset - noncurrent — 14,467 Other assets 3,363 2,669 Total assets $ 489,513 $ 461,852 See accompanying notes to the consolidated financial statements. F-4 Inogen, Inc. Consolidated Balance Sheets (continued) (amounts in thousands, except share and per share amounts) December 31, 2021 2020 Liabilities and stockholders' equity Current liabilities Accounts payable and accrued expenses $ 25,689 $ 33,712 Accrued payroll 17,307 7,091 Warranty reserve - current 6,480 5,740 Operating lease liability - current 3,393 1,931 Deferred revenue - current 8,568 6,994 Income tax payable 75 1,242 Total current liabilities 61,512 56,710 Long-term liabilities Warranty reserve - noncurrent 7,246 8,654 Operating lease liability - noncurrent 23,281 8,078 Earnout liability - noncurrent 15,386 26,940 Deferred revenue - noncurrent 11,861 11,822 Deferred tax liability - noncurrent — 25 Total liabilities 119,286 112,229 Commitments and contingencies (Note 8) Stockholders' equity Common stock, $ 0.001 par value per share; 200,000,000 shares authorized; 22,731,586 and 22,131,447 shares issued and outstanding as of December 31, 2021 and 2020, respectively 23 22 Additional paid-in capital 299,463 273,521 Retained earnings 69,272 75,605 Accumulated other comprehensive income 1,469 475 Total stockholders' equity 370,227 349,623 Total liabilities and stockholders' equity $ 489,513 $ 461,852 See accompanying notes to the consolidated financial statements. F-5 Inogen, Inc. Consolidated Statements of Comprehensive Income (Loss) (amounts in thousands, except share and per share amounts) Years Ended December 31, 2021 2020 2019 Revenue Sales revenue $ 311,730 $ 280,189 $ 340,546 Rental revenue 46,273 28,298 21,397 Total revenue 358,003 308,487 361,943 Cost of revenue Cost of sales revenue 161,824 156,764 175,974 Cost of rental revenue, including depreciation of $ 8,860 , $ 5,695 and $ 6,253 , respectively 19,696 13,543 14,108 Total cost of revenue 181,520 170,307 190,082 Gross profit Gross profit-sales revenue 149,906 123,425 164,572 Gross profit-rental revenue 26,577 14,755 7,289 Total gross profit 176,483 138,180 171,861 Operating expense Research and development 16,576 14,080 9,401 Sales and marketing 112,815 97,520 105,550 General and administrative 37,852 38,605 37,121 Total operating expense 167,243 150,205 152,072 Income (loss) from operations 9,240 ( 12,025 ) 19,789 Other income (expense) Interest income 129 909 4,712 Other income (expense) ( 710 ) 5,836 ( 229 ) Total other income (expense), net ( 581 ) 6,745 4,483 Income (loss) before provision for income taxes 8,659 ( 5,280 ) 24,272 Provision for income taxes 14,992 549 3,322 Net income (loss) ( 6,333 ) ( 5,829 ) 20,950 Other comprehensive income (loss), net of tax Change in foreign currency translation adjustment ( 800 ) 857 ( 123 ) Change in net unrealized gains (losses) on foreign currency hedging 1,746 ( 82 ) ( 1,566 ) Less: reclassification adjustment for net (gains) losses included in net income 47 ( 207 ) 872 Total net change in unrealized gains (losses) on foreign currency hedging 1,793 ( 289 ) ( 694 ) Change in net unrealized gains (losses) on marketable securities 1 ( 6 ) 6 Total other comprehensive income (loss), net of tax 994 562 ( 811 ) Comprehensive income (loss) $ ( 5,339 ) $ ( 5,267 ) $ 20,139 Basic net income (loss) per share attributable to common stockholders (Note 2) $ ( 0.28 ) $ ( 0.27 ) $ 0.96 Diluted net income (loss) per share attributable to common stockholders (Note 2) $ ( 0.28 ) $ ( 0.27 ) $ 0.94 Weighted-average number of shares used in calculating net income (loss) per share attributable to common stockholders: Basic common shares 22,490,027 21,980,326 21,821,104 Diluted common shares 22,490,027 21,980,326 22,241,064 See accompanying notes to the consolidated financial statements. F-6 Inogen, Inc. Consolidated Statements of Stockholders’ Equity (amounts in thousands, except share amounts) Accumulated Additional other Total Common stock paid-in Retained comprehensive stockholders' Shares Amount capital earnings income (loss) equity Balance, December 31, 2018 21,778,632 $ 22 $ 249,194 $ 60,484 $ 724 $ 310,424 Stock-based compensation — — 9,129 — — 9,129 Employee stock purchases 47,816 — 2,748 — — 2,748 Restricted stock awards issued, net of forfeitures 82,677 — — — — — Vesting of restricted stock units 28,115 — ( 82 ) — — ( 82 ) Shares withheld related to net restricted stock settlement ( 15,121 ) — ( 846 ) — — ( 846 ) Stock options exercised 109,291 — 3,109 — — 3,109 Net income — — — 20,950 — 20,950 Other comprehensive loss — — — — ( 811 ) ( 811 ) Balance, December 31, 2019 22,031,410 $ 22 $ 263,252 $ 81,434 $ ( 87 ) $ 344,621 Stock-based compensation — — 8,203 — — 8,203 Employee stock purchases 68,467 — 2,084 — — 2,084 Restricted stock awards issued, net of forfeitures ( 27,729 ) — — — — — Vesting of restricted stock units 49,117 — ( 19 ) — — ( 19 ) Shares withheld related to net restricted stock settlement ( 8,444 ) — ( 331 ) — — ( 331 ) Stock options exercised 18,626 — 332 — — 332 Net loss — — — ( 5,829 ) — ( 5,829 ) Other comprehensive income — — — — 562 562 Balance, December 31, 2020 22,131,447 $ 22 $ 273,521 $ 75,605 $ 475 $ 349,623 Stock-based compensation — — 10,943 — — 10,943 Employee stock purchases 60,299 — 1,948 — — 1,948 Restricted stock awards issued, net of forfeitures ( 43,658 ) — — — — — Vesting of restricted stock units 101,811 — ( 412 ) — — ( 412 ) Shares withheld related to net restricted stock settlement ( 4,351 ) — ( 235 ) — — ( 235 ) Stock options exercised 486,038 1 13,698 — — 13,699 Net loss — — — ( 6,333 ) — ( 6,333 ) Other comprehensive income — — — — 994 994 Balance, December 31, 2021 22,731,586 $ 23 $ 299,463 $ 69,272 $ 1,469 $ 370,227 See accompanying notes to the consolidated financial statements. F-7 Inogen, Inc. Consolidated Statements of Cash Flows (amounts in thousands) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities Net income (loss) $ ( 6,333 ) $ ( 5,829 ) $ 20,950 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 21,628 18,581 13,834 Loss on rental assets and other fixed assets 1,521 864 568 Gain on sale of former rental assets ( 65 ) ( 94 ) ( 68 ) Provision for sales revenue returns and doubtful accounts 11,094 10,486 17,177 Provision for rental revenue adjustments — 2,579 2,233 Provision for inventory losses 2,062 1,283 972 Stock-based compensation expense 10,943 8,203 9,129 Deferred income taxes 14,444 ( 82 ) 2,873 Change in fair value of earnout liability ( 11,596 ) 1,053 810 Changes in operating assets and liabilities: Accounts receivable ( 6,127 ) ( 8,177 ) ( 16,707 ) Inventories ( 10,775 ) 7,591 ( 10,336 ) Income tax receivable 705 928 ( 321 ) Prepaid expenses and other current assets ( 8,104 ) 31 ( 2,693 ) Operating lease right-of-use asset ( 16,087 ) ( 2,970 ) ( 5,856 ) Other noncurrent assets 96 2,296 ( 2,064 ) Accounts payable and accrued expenses ( 6,476 ) ( 5,830 ) 3,202 Accrued payroll 10,231 870 ( 5,188 ) Warranty reserve ( 668 ) 1,823 3,041 Deferred revenue 1,613 ( 203 ) 2,724 Income tax payable ( 1,141 ) 319 429 Operating lease liability 16,668 3,291 6,716 Other noncurrent liabilities — — ( 832 ) Net cash provided by operating activities 23,633 37,013 40,593 Cash flows from investing activities Purchases of marketable securities ( 9,987 ) ( 22,751 ) ( 58,686 ) Maturities of marketable securities 19,256 14,545 91,350 Investment in intangible assets ( 132 ) ( 255 ) ( 254 ) Investment in property and equipment ( 5,482 ) ( 4,385 ) ( 3,143 ) Production and purchase of rental equipment ( 18,453 ) ( 12,957 ) ( 3,117 ) Proceeds from sale of former assets 153 163 194 Payment for acquisition, net of cash acquired — — ( 70,401 ) Net cash used in investing activities ( 14,645 ) ( 25,640 ) ( 44,057 ) See accompanying notes to the consolidated financial statements. F-8 Inogen, Inc. Consolidated Statements of Cash Flows (continued) (amounts in thousands) Years Ended December 31, 2021 2020 2019 Cash flows from financing activities Proceeds from stock options exercised 13,699 332 3,109 Proceeds from employee stock purchases 1,948 2,084 2,748 Payment of employment taxes related to release of restricted stock ( 647 ) ( 350 ) ( 928 ) Net cash provided by financing activities 15,000 2,066 4,929 Effect of exchange rates on cash ( 426 ) 486 ( 62 ) Net increase in cash and cash equivalents 23,562 13,925 1,403 Cash and cash equivalents, beginning of period 211,962 198,037 196,634 Cash and cash equivalents, end of period $ 235,524 $ 211,962 $ 198,037 Supplemental disclosures of cash flow information Cash paid (received) during the period for income taxes, net of refunds received $ 1,544 $ ( 713 ) $ 239 Supplemental disclosure of non-cash transactions Accrued value of earnout related to acquisition — — 25,749 Property and equipment in account payable and accrued liabilities 353 55 66 See accompanying notes to the consolidated financial statements. F-9 Inogen, Inc. Notes to the Consolidated Financial Statements (amounts in thousands, except share and per share amounts) 1. Nature of business Inogen, Inc. (Company or Inogen) was incorporated in Delaware on November 27, 2001. The Company is a medical technology company that primarily develops, manufactures and markets innovative portable oxygen concentrators (POCs) used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions. Traditionally, these patients have relied on stationary oxygen concentrator systems for use in the home and oxygen tanks or cylinders for mobile use, which the Company calls the delivery model. The tanks and cylinders must be delivered regularly and have a finite amount of oxygen, which requires patients to plan activities outside of their homes around delivery schedules and a finite oxygen supply. Additionally, patients must attach long, cumbersome tubing to their stationary concentrators simply to enable mobility within their homes. The Company’s proprietary Inogen One ® systems concentrate the air around the patient to offer a single source of supplemental oxygen anytime, anywhere with a single battery and can be plugged into an outlet when at home, in a car, or in a public place with outlets available. 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. The Company incorporated Inogen Europe Holding B.V., a Dutch limited liability company, on April 13, 2017 . On May 4, 2017, Inogen Europe Holding B.V. acquired all issued and outstanding capital stock of MedSupport Systems B.V. (MedSupport) and began operating under the name Inogen Europe B.V. The Company merged Inogen Europe Holding B.V. and Inogen Europe B.V. on December 28, 2018. Inogen Europe B.V. is the remaining legal entity. Inogen completed the acquisition of New Aera, Inc. (New Aera) on August 9, 2019. 2. Summary of significant accounting policies Basis of presentation 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. GAAP). Basis of consolidation The consolidated financial statements include the accounts of Inogen, Inc. and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated. Accounting estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements and other factors that management believes to be reasonable. Significant areas requiring the use of management estimates relate to revenue recognition, warranty reserves and expense, determining the stand-alone selling price (SSP) and service period of performance obligations, rental asset valuations and write-downs, accounts receivable allowances for bad debts, returns and adjustments, impairment of long-lived assets, stock-based compensation expense, income taxes, fair value of acquired intangible assets and goodwill and fair value of earnout liabilities. Actual results could differ from these estimates. Revenue The Company generates revenue primarily from sales and rentals of its products. The Company’s products consist of its proprietary line of oxygen concentrators, non-invasive ventilators, and related accessories. Other revenue, which is included in sales revenue on the statements of comprehensive income (loss), primarily comes from service contracts, replacement parts and freight revenue for product shipments. F-10 Sales revenue Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue from product sales is generally recognized upon shipment of the product but is deferred for certain transactions when control has not yet transferred to the customer. The Company’s product is generally sold with a right of return and the Company may provide other incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and incentives are estimated at the time sales revenue is recognized. The provision for estimated returns is calculated based on historical data and future expectations. Sales revenue incentives within the Company’s contracts are estimated based on the most likely amounts expected on the related sales transactions and recorded as a reduction to revenue at the time of sale in accordance with the terms of the contract. Accordingly, revenue is recognized net of allowances for estimated returns and incentives. For a fixed price, the Company also offers a lifetime warranty for direct-to-consumer sales for its oxygen concentrators. Lifetime warranties are only offered to patients upon the initial sale of oxygen concentrators directly from the Company and are non-transferable. Lifetime warranties are considered to be a distinct performance obligation that are accounted for separately from its sale of oxygen concentrators with a standard warranty of three years . The revenue is allocated to the distinct lifetime warranty performance obligation based on a relative SSP method. The Company has vendor-specific objective evidence of the selling price for its equipment. To determine the selling price of the lifetime warranty, the Company uses its best estimate of the SSP for the distinct performance obligation as the lifetime warranty is neither separately priced nor is the selling price available through third-party evidence. To calculate the selling price associated with the lifetime warranties, management considers the profit margins of service revenue, the average estimated cost of lifetime warranties and the price of extended warranties. Revenue from the distinct lifetime warranty is deferred after the delivery of the equipment and recognized based on an estimated mortality rate over five years, which is the estimated performance period of the contract based on the average patient life expectancy. Revenue from the sale of the Company’s repair services is recognized when the performance obligations are satisfied and collection of the receivables is probable. Other revenue from the sale of replacement parts is generally recognized when product is shipped to customers. Freight revenue consists of fees associated with the deployment of products internationally and domestically when expedited freight options are requested or when minimum order quantities are not met. Freight revenue is generally recognized upon shipment of the product but is deferred if control has not yet transferred to the customer. Shipping and handling costs for sold products and rental assets shipped to the Company’s customers are included on the consolidated statements of comprehensive income (loss) as part of cost of sales revenue and cost of rental revenue, respectively. The payment terms and conditions of customer contracts vary by customer type and the products and services offered. For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer. The timing of sales revenue recognition, billing and cash collection results in billed accounts receivable and deferred revenue in the consolidated balance sheet. Contract liabilities primarily consist of deferred revenue related to lifetime warranties on direct-to-consumer sales revenue when cash payments are received in advance of services performed under the contract. 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 years ended December 31, 2021 and December 31, 2020 was primarily driven by $ 6,764 and $ 5,258 , respectively, of payments received in advance of satisfying performance obligations, par tially offset by $ 5,866 and $ 5,908 of revenues recognized that were included in the deferred revenue balances as of December 31, 2020 and December 31, 2019, respectively . Deferred revenue related to lifetime warranties was $ 17,976 and $ 17,078 as of December 31, 2021 and December 31, 2020, respectively, and is classified within deferred revenue – current and noncurrent deferred revenue in the consolidated balance sheets. The Company elected to apply the practical expedient in accordance with Accounting Standards Codification (ASC) 606 — Revenue Recognition and did not evaluate contracts of one year or less for the existence of a significant financing component . The Company does not expect any revenue to be recognized over a multi-year period with the exception of revenue related to lifetime warranties. F-11 The Company’s sales revenue is primarily derived from the sale of its oxygen concentrator products to individual consumers, home medical equipment providers, distributors, the Company’s private label partner and resellers worldwide. Sales revenue is classified into two areas: business-to-business sales and direct-to-consumer sales. The following table sets forth the Company’s sales revenue disaggregated by sales channel and geographic region: (amounts in thousands) Years ended December 31, Revenue by region and category 2021 2020 2019 Business-to-business domestic sales $ 91,371 $ 96,423 $ 106,428 Business-to-business international sales 79,460 62,147 77,960 Direct-to-consumer domestic sales 140,899 121,619 156,158 Total sales revenue $ 311,730 $ 280,189 $ 340,546 Rental revenue The Company recognizes equipment rental revenue over the non-cancelable lease term, which is one month, less estimated adjustments, in accordance with Accounting Standards Codification (ASC) 842— Leases . The Company has separate contracts with each patient that are not subject to a master lease agreement with any third-party payor. The Company evaluates the individual lease contracts at lease inception and the start of each monthly renewal period to determine if it is reasonably certain that the monthly renewal option and the bargain renewal option associated with the potential capped free rental period would be exercised. Historically, the exercise of the monthly renewal and bargain renewal option is not reasonably certain at lease inception and at most subsequent monthly lease renewal periods. If the Company determines that the reasonably certain threshold for an individual patient is met at lease inception or at a monthly lease renewal period, such determination would impact the bargain renewal period for an individual lease. The Company would first consider the lease classification issue (sales-type lease or operating lease) and then appropriately recognize or defer rental revenue over the lease term, which may include a portion of the capped rental period. The Company deferred $ 0 associated with the capped rental period as of December 31, 2021 and December 31, 2020. The lease term begins on the date products are shipped to patients and are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare, private payors, and Medicaid. Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application, claim denial or account review. The Company adjusts revenue for historical trends on revenue adjustments due to timely filings, deaths, hospice, and other types of analyzable adjustments on a monthly basis to record rental revenue at the expected collectible amounts. Accounts receivable is reduced by an allowance for doubtful accounts which provides for those accounts from which payment is not expected to be received although product was delivered and revenue was earned. The determination that an account is uncollectable, and the ultimate write-off of that account occurs once collection is considered to be highly unlikely, and it is written-off and charged to the allowance at that time. Amounts billed but not earned due to the timing of the billing cycle are deferred and recognized in revenue on a straight-line basis over the monthly billing period. For example, if the first day of the billing period does not fall on the first of the month, then a portion of the monthly billing period will fall in the subsequent month and the related revenue and cost would be deferred based on the service days in the following month. The lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for supplies. The Company elected the practical expedient to treat the lease and non-lease components as a single lease component. Rental revenue is recognized as earned, less estimated adjustments. Revenue not billed at the end of the period is reviewed for the likelihood of collections and accrued. The rental revenue stream is not guaranteed, and payment will cease if the patient no longer needs oxygen or returns the equipment. Revenue recognized is at full estimated allowable amounts; transfers to secondary insurances or patient responsibility have no net effect on revenue. Rental revenue is earned for that entire month if the patient is on service on the first day of the 30 -day period commencing on the recurring date of service for a particular claim, regardless of whether there is a change in condition or death after that date. Included in rental revenue are unbilled amounts for which the revenue recognition criteria had been met as of period-end but were not yet billed to the payor. The estimate of net unbilled rental revenue recognized is based on historical trends and estimates of future collectability. In addition, the Company estimates potential future adjustments and write-offs of these unbilled amounts and includes these estimates in the allowance for adjustments and write-offs of rental revenue which is netted against gross receivables. F-12 Product Warranty The Company generally provides a warranty against defects in material and workmanship. The Company provides a 3-year, 5-year or lifetime warranty on Inogen One systems sold and a 3-year and lifetime warranty on Inogen At Home systems sold. The Tidal Assist® Ventilator (TAV ® ) system has a 1-year and a 3-year warranty. The Company also offers a lifetime warranty for direct-to-consumer sales of its oxygen concentrators. For a fixed price, the Company agrees to provide a fully functional oxygen concentrator for the remaining life of the patient. Lifetime warranties are only offered to patients upon the initial sale of oxygen concentrators directly from the Company and are non-transferable. The Company’s products are subject to regulatory and quality standards. The Company establishes an accrued liability for the estimated warranty costs at the time of revenue recognition, with a corresponding provision to cost of goods sold. The Company evaluates the liability quarterly. Warranty costs are primarily estimated based on product return rates, historical warranty repair costs incurred and historical failure rates. The Company may make further adjustments to the warranty reserve when deemed appropriate, giving additional consideration to length of time the product version has been sold and future expectations of performance based on new features and capabilities. Actual warranty costs could differ materially from the estimated amounts. Fair value accounting ASC 820 — Fair Value Measurements and Disclosures creates a single definition of fair value, establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement is to estimate the price at which an orderly transaction to sell an asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Assets and liabilities adjusted to fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Level inputs, as defined by ASC 820, are as follows: Level input Input definition Level 1 Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. Level 2 Inputs, other than quoted prices included in Level 1, that are observable for the asset or liability through corroboration with market data at the measurement date. Level 3 Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. The carrying values of its financial instruments approximate fair value based on their short-term nature. Fair value of financial instruments The Company obtained the fair value of its available-for-sale investments, which are not in active markets, from a third-party professional pricing service using quoted market prices for identical or comparable instruments, rather than direct observations of quoted prices in active markets. The Company's professional pricing service gathers observable inputs for all of its fixed income securities from a variety of industry data providers (e.g., large custodial institutions) and other third-party sources. Once the observable inputs are gathered, all data points are considered, and the fair value is determined. The Company validates the quoted market prices provided by its primary pricing service by comparing their assessment of the fair values against the fair values provided by its investment managers. The Company's investment managers use similar techniques to its professional pricing service to derive pricing as described above. As all significant inputs were observable, derived from observable information in the marketplace or supported by observable levels at which transactions are executed in the marketplace, the Company has classified its marketable securities within Level 2 of the fair value hierarchy. F-13 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 December 31, 2021 Gross Cash Adjusted unrealized and cash Marketable (amounts in thousands) cost gains Fair value equivalents securities Cash $ 48,817 $ — $ 48,817 $ 48,817 $ — Level 1: Money market accounts 186,707 — 186,707 186,707 — Level 2: Corporate bonds 9,988 1 9,989 — 9,989 Total $ 245,512 $ 1 $ 245,513 $ 235,524 $ 9,989 As of December 31, 2020 Gross Cash Adjusted unrealized and cash Marketable (amounts in thousands) cost gains (losses) Fair value equivalents securities Cash $ 52,812 $ — $ 52,812 $ 52,812 $ — Level 1: Money market accounts 159,150 — 159,150 159,150 — Level 2: Corporate bonds 11,549 ( 1 ) 11,548 — 11,548 U.S. Treasury securities 4,107 — 4,107 — 4,107 Agency mortgage-backed securities 3,601 1 3,602 — 3,602 Total $ 231,219 $ — $ 231,219 $ 211,962 $ 19,257 The following table summarizes the estimated fair value of the Company’s investments in marketable securities, classified by the contractual maturity date of the securities: December 31, (amounts in thousands) 2021 Due within one year $ 9,989 Due in one year through five years — Total $ 9,989 Fair value of derivative instruments and hedging activities The Company transacts business in foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. The Company has entered into foreign currency forward contracts, generally with maturities of twelve months or less, to reduce the volatility of cash flows primarily related to forecasted revenue denominated in certain foreign currencies. These contracts allow the Company to sell Euros in exchange for U.S. dollars at specified contract rates. Forward contracts are used to hedge forecasted sales over specific months. Changes in the fair value of these forward contracts designed as cash flow hedges are recorded as a component of accumulated other comprehensive income 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 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. 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 (loss). The gains and losses on these contracts generally offset the gains and losses associated with the underlying foreign currency-denominated balances, which are also reported in other income (expense), net. F-14 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 $ 1,671 and a related payable of $ 863 as of December 31, 2021 and 2020, respectively. The Company documents the hedging relationship and its risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness. The Company assesses hedge effectiveness and ineffectiveness at a minimum quarterly but may assess it monthly. For derivative instruments that are designed and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivative is reported in other comprehensive income (loss) and reclassified into earnings in the same periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current period earnings. The Company will discontinue hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedge risk. The cash flow hedge is de-designated because a forecasted transaction is not probable of occurring, or management determines to remove the designation of the cash flow hedge. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company continues to carry the derivative at its fair value on the balance sheet and recognizes any subsequent changes in the fair value in earnings. When it is probable that a forecasted transaction will not occur, the Company will discontinue hedge accounting and recognize immediately in earnings gains and losses that were accumulated in other comprehensive income (loss) related to the hedging relationship. Fair value of accumulated other comprehensive income (loss) The components of accumulated other comprehensive income (loss) were as follows: As of December 31, 2021 Foreign Unrealized Unrealized Accumulated currency gains gains (losses) other translation on marketable on cash comprehensive (amounts in thousands) adjustments securities flow hedges income Balance as of December 31, 2020 $ 1,128 $ — $ ( 653 ) $ 475 Other comprehensive income (loss) ( 800 ) 1 1,793 994 Balance as of December 31, 2021 $ 328 $ 1 $ 1,140 $ 1,469 As of December 31, 2020 Foreign Unrealized Unrealized Accumulated currency gains (losses) losses other translation on marketable on cash comprehensive (amounts in thousands) adjustments securities flow hedges income (loss) Balance as of December 31, 2019 $ 271 $ 6 $ ( 364 ) $ ( 87 ) Other comprehensive income (loss) 857 ( 6 ) ( 289 ) 562 Balance as of December 31, 2020 $ 1,128 $ — $ ( 653 ) $ 475 Comprehensive income (loss) is the total net earnings and all other non-owner changes in equity. Except for net income (loss) and unrealized gains and losses on cash flow hedges, the Company does not have any transactions or other economic events that qualify as comprehensive income (loss). Fair value of earnout liability The earnout liability will be adjusted to fair value at each reporting date until settled. At the end of each reporting period after the acquisition date, the arrangement is remeasured at its fair value, with changes in fair value recorded in general and administrative expense. F-15 The Company has obligations to pay up to $ 31,400 in earnout payments in cash if certain future financial results are met. The earnout liability was valued using Level 3 inputs. The fair value of the earnout was determined by employing a Monte Carlo simulation in a risk-neutral framework. The underlying simulated variable includes recognized revenue. The recognized revenue volatility estimate was based on a study of historical asset volatility for a set of comparable public companies. The model includes other assumptions including the market price of risk, which was calculated as the weighted average cost of capital (WACC) less the long-term risk free rate. The earnout period for recognized revenue is each calendar year beginning with calendar year 2019 and ending on the calendar year in which the earnout consideration equals the earnout cap. The following table provides quantitative information about Level 3 inputs for fair value measurement of the earnout liability as of December 31, 2021 and December 31, 2020. Significant increases or decreases in these inputs in isolation could result in a significant impact on our fair value measurement: As of As of Simulation input December 31, 2021 December 31, 2020 Revenue volatility 15.00 % 35.00 % WACC 10.50 % 12.00 % 20-year risk free rate 2.02 % 1.45 % Market price of risk 2.68 % 8.00 % The reconciliation of the earnout liability measured and carried at fair value on a recurring basis is as follows: (amounts in thousands) Balance as of December 31, 2019 $ 26,559 Change in fair value 1,053 Balance as of December 31, 2020 $ 27,612 Change in fair value ( 11,596 ) Balance as of December 31, 2021 $ 16,016 The Company recorded $ 630 and $ 672 of preacquisition loss recoveries that can be withheld from any earnout amounts payable as of December 31, 2021 and December 31, 2020, respectively. Cash, cash equivalents, and marketable securities The Company considers all short-term highly liquid investments with a maturity of three months or less to be cash equivalents. The Company’s marketable debt securities are classified and accounted for as available-for-sale. Cash equivalents are recorded at cost plus accrued interest, which is considered adjusted cost, and approximates fair value. Marketable debt securities are included in cash equivalents and marketable securities based on the maturity date of the security. Short-term investments are included in marketable securities in the current period presentation. The Company considers investments with maturities greater than three months, but less than one year, to be marketable securities. Investments are reported at fair value with realized and unrealized gains or losses reported in other income (expense), net. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Credit losses and other-than-temporary impairments are declines in fair value that are not expected to recover and are charged to other income (expense), net. F-16 Cash, cash equivalents, and marketable securities consist of the following: (amounts in thousands) December 31, Cash and cash equivalents 2021 2020 Cash $ 48,817 $ 52,812 Money market accounts 186,707 159,150 Total cash and cash equivalents $ 235,524 $ 211,962 Marketable securities Corporate bonds $ 9,989 $ 11,548 U. S. Treasury securities — 4,107 Agency mortgage-backed securities — 3,602 Total marketable securities $ 9,989 $ 19,257 Accounts receivable Accounts receivable are customer obligations due under normal sales and rental terms. The Company performs credit evaluations of the customers’ financial condition and generally does not require collateral. The allowance for doubtful accounts is maintained at a level that, in management’s opinion, is adequate to absorb potential losses related to accounts receivable and is based upon the Company’s continuous evaluation of the collectability of outstanding balances. Management’s evaluation takes into consideration such factors as past bad debt experience, economic conditions and information about specific receivables. The Company’s evaluation also considers the age and composition of the outstanding amounts in determining their net realizable value. The allowance for doubtful accounts is based on estimates, and ultimate losses may vary from current estimates. As adjustments to these estimates become necessary, they are reported in general and administrative expense for sales revenue in the periods in which they become known. The allowance is increased by bad debt provisions, net of recoveries, and is reduced by direct write-offs. The Company generally does not allow returns from providers for reasons not covered under its standard warranty. Therefore, provision for returns applies primarily to direct-to-consumer sales. This reserve is calculated primarily based on actual historical return rates under the Company’s 30-day return program and is applied to the related sales revenue for the last month of the quarter reported. The Company also records an estimate for rental revenue adjustments which is recorded as a reduction of rental revenue and net rental accounts receivable balances. These adjustments result from contractual adjustments, audit adjustments, untimely claims filings, or billings not paid due to another provider performing same or similar functions for the patient in the same period, all of which prevent billed revenue from becoming realizable. The reserve is based on historical revenue adjustments as a percentage of rental revenue billed and unbilled during the related period. When recording the allowance for doubtful accounts for sales revenue, the bad debt expense account (general and administrative expense account) is charged and when recording allowance for sales returns, the sales returns account (contra sales revenue account) is charged. The Company consistently applies its allowance estimation methodology from period-to-period. The Company’s best estimate is made on an accrual basis and adjusted in future periods as required. Any adjustments to the prior period estimates are included in the current period. As additional information becomes known, the Company adjusts its assumptions accordingly to change its estimate of accounts receivable. For the years ended December 31, 2021 and December 31, 2020, the Company had increases of $ 877 and $ 575 , respectively, in the net rental revenue related to prior years. Net accounts receivable (gross accounts receivable, net of allowances) balance concentrations by major category as of December 31, 2021 and December 31, 2020 were as follows: As of As of (amounts in thousands) December 31, 2021 December 31, 2020 Net accounts receivable $ % $ % Rental (1) $ 6,011 24.6 % $ 3,794 12.8 % Business-to-business and other receivables (2) 18,441 75.4 % 25,923 87.2 % Total net accounts receivable $ 24,452 100.0 % $ 29,717 100.0 % (1) Rental includes Medicare, Medicaid/other government, private insurance and patient pay. F-17 ( 2 ) Business-to business receivables included one customer with an accounts receivable balance of $ 5,945 and $ 7,044 as of December 31, 2021 and December 31, 2020, respectively. The 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 $ 10,000 in coverage as of December 31, 2021 and December 31, 2020 for this customer with a $ 400 deductible and 10 % retention. The following table sets forth the percentage breakdown of the Company’s net accounts receivable by aging category by invoice due date as of December 31, 2021 and December 31, 2020. As of As of (amounts in thousands) December 31, 2021 December 31, 2020 Net accounts receivable by aging category $ % $ % Held and Unbilled $ 848 3.5 % $ 298 1.0 % Aged 0-90 days 22,194 90.8 % 28,604 96.2 % Aged 91-180 days 888 3.6 % 560 1.9 % Aged 181-365 days 450 1.8 % 230 0.8 % Aged over 365 days 72 0.3 % 25 0.1 % Total net accounts receivable $ 24,452 100.0 % $ 29,717 100.0 % The following table sets forth the accounts receivable allowances as of December 31, 2021 and December 31, 2020: As of As of (amounts in thousands) December 31, 2021 December 31, 2020 Allowances - accounts receivable $ % $ % Doubtful accounts $ 52 0.2 % $ 52 0.2 % Rental revenue adjustments — 0.0 % 396 1.3 % Sales returns 810 3.1 % 742 2.4 % Total allowances - accounts receivable $ 862 3.3 % $ 1,190 3.9 % Concentration of credit risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, marketable securities and accounts receivable. At times, cash account balances may be in excess of the amounts insured by the Federal Deposit Insurance Corporation. However, management believes the risk of loss to be minimal. The Company performs periodic evaluations of the relative credit standing of these institutions and has not experienced any losses on its cash and cash equivalents to date. The Company has also entered into hedging relationships with a single counterparty to offset the forecasted Euro-based revenues. The credit risk has been reduced due to a net settlement arrangement whereby the Company is allowed to net settle transactions with a single net amount payable by one party to the other. Concentration of customers and vendors The Company primarily sells its products to traditional home medical equipment providers, distributors, and resellers in the United States and in foreign countries on a credit basis. The Company also sells its products direct-to-consumers on a primarily prepayment basis. The Medicare service reimbursement programs represented more than 10% of the Company’s total revenue for the year ended December 31, 2021. One single customer represented more than 10% of the Company’s total revenue for the year ended December 31, 2020. No single customer represented more than 10% of the Company’s total revenue for the year ended December 31, 2019. One single customer and Medicare each represented more than 10% of the Company’s net accounts receivable balance with accounts receivable balances of $ 5,945 and $ 2,685 , respectively, as of December 31, 2021, and two customers each represented more than 10% of the Company’s net accounts receivable balance with accounts receivable balances of $ 8,417 and $ 7,044 , respectively, as of December 31, 2020. The Company also rents products directly to consumers for insurance reimbursement, which resulted in a customer concentration relating to Medicare’s service reimbursement programs. Medicare’s service reimbursement programs accounted for 81.9 %, 81.5 % and 81.1 % of rental revenue in 2021, 2020 and 2019, respectively, and based on total revenue were 10.6 %, 7.5 % and 4.8 % for 2021, 2020 and 2019, respectively. Accounts receivable balances relating to Medicare’s service reimbursement programs (including held and unbilled, net of allowances) amounted to $ 2,685 or 11.0 % of total net accounts receivable as of December 31, 2021 as compared to $ 1,882 or 6.3 % of total net accounts receivable as of December 31, 2020. F-18 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 year ended December 31, 2021, the Company’s three major vendors accounted for 16.3 %, 12.1 % and 9.9 %, respectively, of total raw material purchases. For the year ended December 31, 2020, the Company’s three major vendors accounted for 20.7 %, 11.7 % and 9.3 %, respectively, of total raw material purchases. A portion of revenue is earned from sales outside the United States. Approximately 74.1 %, 73.6 % and 70.2 % of the non-U.S. revenue for the years ended December 31, 2021, 2020 and 2019, respectively, were invoiced in Euros. A breakdown of the Company’s revenue from U.S. and non-U.S. sources for the years ended December 31, 2021, 2020 and 2019, respectively, is as follows: Years ended December 31, (amounts in thousands) 2021 2020 2019 U.S. revenue $ 278,543 $ 246,340 $ 283,983 Non-U.S. revenue 79,460 62,147 77,960 Total revenue $ 358,003 $ 308,487 $ 361,943 Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined using a standard cost method, including material, labor and manufacturing overhead, whereby the standard costs are updated at least quarterly to reflect approximate actual costs using the first-in, first-out method. 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 $ 1,943 and $ 1,153 as of December 31, 2021 and 2020, 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. The Company prepaid for raw materials of $ 15,426 as of December 31, 2021 that were classified in prepaid expenses and other current assets. During the years ended December 31, 2021, 2020 and 2019, $ 906 , $ 1,970 and $ 1,043 , 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 flows. Inventories that are considered current consist of the following: December 31, (amounts in thousands) 2021 2020 Raw materials and work-in-progress $ 21,909 $ 22,318 Finished goods 12,116 3,743 Less: reserves ( 2,152 ) ( 1,246 ) Inventories, net $ 31,873 $ 24,815 Property and equipment Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the assets’ estimated useful lives as follows: Rental equipment 1.5- 5 years Manufacturing equipment and tooling 3 - 5 years Computer equipment and software 2 - 3 years Furniture and equipment 3 - 5 years Leasehold improvements Lesser of estimated useful life or remaining lease term Expenditures for additions, improvements and replacements are capitalized and depreciated to a salvage value of $ 0 . Repair and maintenance costs on rental equipment are included in cost of rental revenue on the consolidated statements of comprehensive income (loss). Repair and maintenance expense, which includes labor, parts and freight, for rental equipment was $ 3,387 , $ 2,527 and $ 2,854 for the years ended December 31, 2021, 2020 and 2019, respectively. Included within property and equipment is construction in process, primarily related to the design and engineering of tooling, jigs and other machinery. In addition, this item also includes computer software or development costs that have been purchased but have not completed the final configuration process for implementation into the Company’s systems. These items have not been placed in service; therefore, no depreciation or amortization was recognized for these items in the respective periods. F-19 Depreciation and amortization expense related to rental equipment and other property and equipment are summarized below for the years ended December 31, 2021, 2020 and 2019, respectively. Years ended December 31, (amounts in thousands) 2021 2020 2019 Rental equipment $ 8,860 $ 5,695 $ 6,253 Other property and equipment 3,993 3,882 3,421 Total depreciation and amortization $ 12,853 $ 9,577 $ 9,674 Property and equipment and rental equipment with associated accumulated depreciation is summarized below as of December 31, 2021 and 2020, respectively. (amounts in thousands) December 31, Property and equipment 2021 2020 Rental equipment, net of allowances of $ 1,290 and $ 575 , respectively $ 59,073 $ 46,953 Other property and equipment 31,522 27,071 Property and equipment 90,595 74,024 Accumulated depreciation Rental equipment 33,355 30,283 Other property and equipment 18,314 15,511 Accumulated depreciation 51,669 45,794 Property and equipment, net Rental equipment, net of allowances of $1,290 and $575, respectively 25,718 16,670 Other property and equipment 13,208 11,560 Property and equipment, net $ 38,926 $ 28,230 Long-lived assets The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360 — Property, Plant, and Equipment . In accordance with ASC 360, long-lived assets to be held are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. During the twelve months ended December 31, 2021, the Company determined that an impairment indicator was present as a result of the court order to dismiss the Company’s preliminary injunction related to the Department of Health and Human Services and the Centers for Medicare and Medicaid Services lawsuit. The relevant long-lived asset grouping was evaluated for impairment. An undiscounted cash flow analysis demonstrated sufficient undiscounted cash flows in excess of the asset group’s carrying value. Estimates and significant assumptions included in the long-lived asset impairment analysis included identification of the asset group and undiscounted cash flow projections. The Company concluded that its definite-lived intangible assets and long-lived assets were not impaired based on the results of the quantitative analyses performed. No impairments were recorded as of December 31, 2021 or 2020. Goodwill and intangible assets Goodwill is tested for impairment on an annual basis as of October 1. Interim testing of goodwill for impairment is also required whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or asset below its carrying amount. The Company periodically reviews the carrying value of long-lived assets to determine whether or not impairment to such value has occurred. If the carrying amount of goodwill exceeds the implied estimated fair value, an impairment charge to current operations is recorded to reduce the carrying value to the implied estimated fair value. There were no accumulated impairment losses as of December 31, 2021 or 2020. The Company will first assess qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. If, based on a review of qualitative factors, it is more likely than not that the fair value is less than its carrying amount, the Company will use a quantitative approach, and calculate the fair value and compare it to its carrying amount. If the fair value exceeds the carrying amount, there is no indication of impairment. If the carrying amount exceeds the fair value, an impairment loss is recorded equal to the difference. F-20 The Company performed an assessment of qualitative factors and determined that no events or circumstances existed that would lead to a determination that it is more likely than not that the fair value of indefinite-lived assets were less than the carrying amount. As such, a quantitative analysis was not required to be performed as of December 31, 202 1 or December 31, 20 20 . Finite-lived intangible assets are amortized over their useful lives and are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Technology and customer relationships are amortized using the straight-line method. Business combinations The results of operations of the businesses acquired by the Company are included as of the acquisition date. The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is allocated to goodwill. The Company may adjust the preliminary purchase price allocation, as necessary, for up to one year after the acquisition closing date if it obtains more information regarding asset valuations and liabilities assumed. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets, operating lease liability – current, and operating lease liability – noncurrent on the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments as the rate implicit in each lease is generally not readily determinable. The operating lease ROU asset also includes any lease payments made to the lessor at or before the commencement date and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components. The Company elected the practical expedient to treat the lease and non-lease components as a single lease component. Additionally, the Company elected the practical expedient to not record leases with an initial term of twelve months or less on the consolidated balance sheets. Loss contingencies The Company is involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. The Company records a liability when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Company reviews at least quarterly and adjusts accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. Research and development Research and development costs are expensed as incurred. Advertising costs Advertising costs, which approximated $ 35,183 , $ 34,180 and $ 40,251 during the years ended December 31, 2021, 2020 and 2019, respectively, are expensed as incurred, excluding the production costs of direct response advertising. Advertising costs are included in sales and marketing expense in the accompanying consolidated statements of comprehensive income (loss). Income taxes The Company accounts for income taxes in accordance with ASC 740 — Income Taxes . Under ASC 740, income taxes are recognized for the amount of taxes payable or refundable for the current period and deferred tax liabilities and assets are recognized for the future tax consequences of transactions that have been recognized in the Company’s consolidated financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. F-21 The Company accounts for uncertainties in income tax es in accordance with ASC 740-10 — Accounting for Uncertainty in Income Taxes . ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes interest and penalties on taxes, if any, within its income tax provision on its consolidated statements of comprehensive income (loss). Accounting for stock-based compensation The Company accounts for its stock-based compensation in accordance with ASC 718 — Compensation—Stock Compensation , which establishes accounting for share-based awards, exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. Stock–based compensation cost for stock options and employee stock purchase plan are determined at the grant date using the Black-Scholes option pricing model. Stock-based compensation cost for stock incentive awards is based on the number of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the employee’s requisite service period. As part of the provisions of ASC 718, the Company is required to estimate potential forfeitures of stock grants and adjust compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods. Foreign currency The functional currency of the Company’s international subsidiary is the local currency. The financial statements of the subsidiary are translated to U.S. dollars using month-end exchange rates for assets and liabilities and average exchange rates for revenue, cost of revenue, operating expense and provision for income taxes. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity. Foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency are reflected as a component of foreign currency exchange gains or losses in other income (expense) in the consolidated statements of comprehensive income (loss). Government grants The Company may receive cash payments from government grants during a public health emergency (PHE). 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 (loss) based on the nature of the terms and conditions of the grant. In 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 2020, the 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. 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 (loss) per share when their effect is dilutive. 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. F-22 The computation of EPS is as follows: Years ended December 31, (amounts in thousands, except share and per share amounts) 2021 2020 2019 Numerator—basic and diluted: Net income (loss) $ ( 6,333 ) $ ( 5,829 ) $ 20,950 Denominator: Weighted-average common shares - basic common stock (1) 22,490,027 21,980,326 21,821,104 Weighted-average common shares - diluted common stock 22,490,027 21,980,326 22,241,064 Net income (loss) per share - basic common stock $ ( 0.28 ) $ ( 0.27 ) $ 0.96 Net income (loss) per share - diluted common stock (2) $ ( 0.28 ) $ ( 0.27 ) $ 0.94 Denominator calculation from basic to diluted: Weighted-average common shares - basic common stock (1) 22,490,027 21,980,326 21,821,104 Stock options and other dilutive awards 166,258 64,471 419,960 Weighted-average common shares - diluted common stock 22,656,285 22,044,797 22,241,064 Shares excluded from diluted weighted-average shares: Stock options 151,344 467,378 53,888 Restricted stock units and restricted stock awards 167,237 292,795 169,305 Shares excluded from diluted weighted-average shares 318,581 760,173 223,193 (1) Unvested restricted stock units and restricted stock awards are not included as shares outstanding in the calculation of basic earnings per share. Vested restricted stock units and restricted stock awards are included in basic earnings per share if all vesting and performance criteria have been met. Performance-based restricted stock units and restricted stock awards are included in the number of shares used to calculate diluted earnings per share as long as all applicable performance criteria are met, and their effect is dilutive. Restricted stock awards are eligible to receive all dividends declared on the Company’s common shares during the vesting period; however, such dividends are not paid until the restrictions lapse. (2) Due to net losses for the years ended December 31, 2021 and December 31, 2020, diluted loss per share is the same as basic. The computations of diluted net income (loss) attributable to common stockholders excluded common stock options, restricted stock units, and restricted stock awards, which were anti-dilutive for the year December 31, 2019. Business segments The Company operates and reports in only one operating and reportable segment – development, manufacturing, marketing, sales, and rental of respiratory products. Management reports financial information on a consolidated basis to the Company’s chief operating decision maker. Recently adopted accounting pronouncements In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The new guidance also improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending the existing guidance . The Company adopted this standard on January 1, 2021 , and adoption of this standard did not have a material impact on the Company’s consolidated financial statement presentation or results. F-23 3. Goodwill and other identifiable intangible assets Goodwill The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020 were as follows: (amounts in thousands) Balance as of December 31, 2019 $ 32,954 Translation adjustment 211 Balance as of December 31, 2020 $ 33,165 Translation adjustment ( 186 ) Balance as of December 31, 2021 $ 32,979 As of December 31, 2021, the Company had no accumulated impairment losses related to goodwill. Intangible assets There were no accumulated impairment losses related to the Company’s intangible assets as of December 31, 2021 and 2020. Amortization expense for intangible assets for the years ended December 31, 2021, 2020 and 2019 was as follows: Years ended December 31, (amounts in thousands) 2021 2020 2019 Research and development expense $ 7,813 $ 7,800 $ 2,914 Sales and marketing expense 181 204 175 General and administrative expense 781 1,000 1,071 Total $ 8,775 $ 9,004 $ 4,160 The following tables represent the changes in net carrying values of the intangibles as of the respective dates: Average estimated Gross (amounts in thousands) useful lives carrying Accumulated December 31, 2021 (in years) amount amortization Net amount Technology 10 $ 77,700 $ 18,454 $ 59,246 Licenses 10 185 180 5 Patents and websites 5 4,519 3,746 773 Customer relationships 4 1,361 1,361 — Commercials 2-3 799 676 123 Total $ 84,564 $ 24,417 $ 60,147 Average estimated Gross (amounts in thousands) useful lives carrying Accumulated December 31, 2020 (in years) amount amortization Net amount Technology 10 $ 77,700 $ 10,684 $ 67,016 Licenses 10 185 174 11 Patents and websites 5 4,488 3,015 1,473 Customer relationships 4 1,474 1,351 123 Commercials 2-3 733 559 174 Total $ 84,580 $ 15,783 $ 68,797 F-24 Annual estimated amortization expense for each of the succeeding fiscal years is as follows: December 31, (amounts in thousands) 2021 2022 $ 8,484 2023 7,881 2024 7,833 2025 7,783 2026 7,770 Thereafter 20,396 Total $ 60,147 4. Current liabilities Accounts payable and accrued expenses as of December 31, 2021 and 2020 consisted of the following: December 31, (amounts in thousands) 2021 2020 Accounts payable $ 10,258 $ 12,520 Accrued inventory (in-transit and unvouchered receipts) and trade payables 12,488 9,023 Accrued litigation settlement — 8,000 Accrued purchasing card liability 1,488 2,468 Accrued franchise, sales and use taxes 486 449 Other accrued expenses 969 1,252 Accounts payable and accrued expenses $ 25,689 $ 33,712 Accrued payroll as of December 31, 2021 and 2020 consisted of the following: December 31, (amounts in thousands) 2021 2020 Accrued bonuses $ 8,274 $ 4 Accrued wages and other payroll related items 5,469 3,796 Accrued vacation 2,894 2,642 Accrued employee stock purchase plan deductions 670 649 Accrued payroll $ 17,307 $ 7,091 5. Leases The Company has entered into operating leases primarily for commercial buildings. These leases have terms which range from 2 years to 11 years, some of which include options to extend the leases for up to 5 years. There are no economic penalties for the Company to extend the lease, and it is not reasonably certain that the Company will exercise the extension options. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. The operating leases do not contain material residual value guarantees or material restrictive covenants. Rent expense, including short-term lease cost, was $ 4,095 , $ 2,864 , and $ 2,288 for the years ended December 31, 2021, 2020 and 2019, respectively. F-25 Information related to the Company’s right-of-use assets and related operating lease liabilities were as follows: (amounts in thousands) Year ended December 31, 2021 Year ended December 31, 2020 Cash paid for operating lease liabilities $ 3,319 $ 2,342 Operating lease cost 3,854 2,622 Non-cash right-of-use assets obtained in exchange for new operating lease obligations 19,417 5,237 Weighted-average remaining lease term 2.8 years 2.8 years Weighted-average discount rate 2.9 % 3.3 % Maturities of lease liabilities due in the 12-month period ending December 31, 2022 $ 3,960 2023 3,962 2024 3,667 2025 2,717 2026 2,708 Thereafter 12,100 29,114 Less imputed interest ( 2,440 ) Total lease liabilities $ 26,674 Operating lease liability - current $ 3,393 Operating lease liability - noncurrent 23,281 Total lease liabilities $ 26,674 6. Income taxes The components of the Company’s income (loss) before provision for income taxes are as follows: Years ended December 31, (amounts in thousands) 2021 2020 2019 United States $ 7,621 $ ( 6,464 ) $ 22,553 Foreign 1,038 1,184 1,719 Income (loss) before provision for income taxes $ 8,659 $ ( 5,280 ) $ 24,272 The provision for income taxes consists of the following: Years ended December 31, (amounts in thousands) 2021 2020 2019 Current tax expense (benefit) Federal $ — $ ( 74 ) $ ( 330 ) State 271 198 136 Foreign 266 381 560 Total current tax expense 537 505 366 Deferred tax expense (benefit) Federal 10,263 309 3,497 State 4,194 ( 193 ) ( 396 ) Foreign ( 22 ) ( 72 ) ( 145 ) Total deferred tax expense 14,435 44 2,956 Interest and penalties 20 — — Provision for income taxes $ 14,992 $ 549 $ 3,322 F-26 The components of deferred tax assets and liabilities consist of the following: (amounts in thousands) As of December 31, Deferred tax assets (liabilities) 2021 2020 Accrued expenses $ 10,575 $ 8,346 Net operating loss and credit carryforward 21,138 20,145 Allowance, reserves and other 2,668 1,381 Stock-based compensation 2,665 3,379 Lease liability 6,507 2,427 Deferred tax assets 43,553 35,678 Property, plant, and equipment ( 7,664 ) ( 4,805 ) Intangible amortization ( 12,389 ) ( 14,292 ) Right-of-use asset ( 6,077 ) ( 2,139 ) Deferred tax liabilities ( 26,130 ) ( 21,236 ) Valuation allowance ( 17,423 ) — Total $ — $ 14,442 Reconciliation of the federal statutory income tax rate to the effective income tax rate for the years ended December 31, 2021, 2020 and 2019 is as follows: Years ended December 31, 2021 2020 2019 U.S. Statutory rate 21.00 % 21.00 % 21.00 % State income taxes, net of federal benefit - 1.39 % - 3.86 % 3.70 % Stock-based compensation - 21.72 % - 16.80 % - 0.81 % R&D credit, net of reserve - 5.95 % - 8.11 % - 8.97 % Change in fair value - 28.19 % - 4.19 % 0.70 % Nondeductible compensation 7.04 % — — Valuation allowance 201.69 % — — Other 0.63 % 1.57 % - 1.94 % Effective income tax rate 173.11 % - 10.39 % 13.68 % The Company operates in several taxing jurisdictions, including U.S. federal, multiple U.S. states and the Netherlands. The statute of limitations has expired for all tax years prior to 2018 for federal and prior to 2016 for various state tax purposes. However, the net operating loss generated on the Company’s federal and state tax returns in prior years may be subject to adjustments by the federal and state tax authorities. As of December 31, 2021, the Company had $ 60,239 and $ 26,193 of federal and state net operating loss carryforwards, respectively, and $ 52,443 of the total federal net operating loss carryforwards have an indefinite life while the remaining federal and state net operating loss carryforwards begin to expire in 2033 and 2028 , respectively, if not utilized. As of December 31, 2021, the Company had federal and California research and development credit carryforward of $ 4,365 and $ 4,327 , respectively. The federal credit will begin to expire in 2022 ; the California credit has indefinite carryforward. Utilization of the Company’s net operating loss and tax credit carryforwards may be subject to annual limitations arising from ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating loss and tax credit carryforwards before their utilization. F-27 The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced. As of December 31, 2021, the Company determined that net deferred tax assets are not more likely than not realizable based on projected future taxable losses primarily due to planned strategic investments in future periods and the impact of the COVID-19 pandemic, including related supply chain impacts on parts availability and cost inflation. Accordingly, the Company recorded a valuation allowance of $ 17,423 as of December 31, 20 2 1 . The Company’s valuation allowance may increase or decrease during the next 12 months based on future operating results . The Company recognizes interest and penalties on taxes, within its income tax provision on its consolidated statements of comprehensive income (loss). Included in the balance of unrecognized tax benefits as of December 31, 2021, 2020 and 2019, were $ 2,078 , $ 1,932 and $ 1,889 , respectively, of tax benefits that, if recognized, would affect the effective tax rate. The Company believes that there will be no significant increases or decreases to unrecognized tax benefits within the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows: (amounts in thousands) December 31, Reconciliation of liability for unrecognized tax benefits 2021 2020 2019 Balance at beginning of period $ 1,932 $ 1,889 $ 1,294 Additions based on tax positions related to current year 146 70 595 Reductions based on tax positions related to prior year — ( 181 ) — Additions based on tax positions related to prior year — 154 — Balance at end of period $ 2,078 $ 1,932 $ 1,889 7. Stockholders’ equity Common stock Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of other classes of stock outstanding. Preferred stock Pursuant to the amended and restated certificate of incorporation filed by the Company in connection with the completion of its initial public offering, the Company’s board of directors is authorized to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. The issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing change in the Company’s control or other corporate action. As of December 31, 2021 and 2020, no shares of preferred stock were issued or outstanding, and the board of directors has not authorized or designated any rights, preferences, privileges and restrictions for any class of preferred stock. Dividends There were no dividends declared during the years ended December 31, 2021, 2020 and 2019. Stock incentive plans 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 December 31, 2021, options to purchase 71,452 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. The 2012 Plan continues to govern outstanding awards granted thereunder. F-28 The Company has a 2014 Equity Incentive Plan (2014 Plan) that provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any parent and subsidiary corporation’s employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, restricted stock awards, stock appreciation rights, performance units and performance shares to its employees, directors and consultants and its parent and subsidiary corporations’ employees and consultants. As of December 31, 2021, awards with respect to 757,401 shares of the Company’s common stock were outstanding, and 1,481,328 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 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 2012 Plan is 2,328,569 shares). The number of shares available for issuance under the 2014 Plan also is increased annually on the first day of each fiscal year by an amount equal to the least of: • 895,346 shares; • 4 % of the outstanding shares of common stock as of the last day of the Company’s immediately preceding fiscal year; or • such other amount as the Company’s board of directors may determine. For 2021, no additional shares were added to the 2014 Plan share reserve pursuant to the provision described above. Stock options Options typically expire between seven and ten years from the date of grant and vest over one to four-year terms. 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 years ended December 31, 2021, 2020 and 2019 is as follows: Remaining weighted- Weighted- average Per share average contractual average Price per exercise terms intrinsic Options share price (in years) value Outstanding as of December 31, 2018 1,127,336 $0.75-$83.30 $ 34.89 3.84 $ 89.28 Exercised ( 109,291 ) 0.75-58.95 28.45 Forfeited ( 37,161 ) 38.54-58.95 44.58 Outstanding as of December 31, 2019 980,884 0.75-83.30 35.24 2.84 34.07 Vested and exercisable as of December 31, 2019 929,825 0.75-83.30 34.73 2.81 34.64 Vested and expected to vest as of December 31, 2019 977,589 0.75-83.30 35.21 2.84 34.11 Outstanding as of December 31, 2019 980,884 0.75-83.30 35.24 2.84 34.07 Exercised ( 18,626 ) 1.17-44.19 17.81 Forfeited ( 6,779 ) 44.19-56.72 48.23 Outstanding as of December 31, 2020 955,479 0.75-83.30 35.49 1.85 11.81 Vested and exercisable as of December 31, 2020 955,479 0.75-83.30 35.49 1.85 11.81 Vested and expected to vest as of December 31, 2020 955,479 0.75-83.30 35.49 1.85 11.81 Outstanding as of December 31, 2020 955,479 0.75-83.30 35.49 1.85 11.81 Exercised ( 486,038 ) 0.75-46.66 28.19 Forfeited ( 10,000 ) 83.30 83.30 Outstanding as of December 31, 2021 459,441 1.17-83.30 42.18 1.36 4.31 Vested and exercisable as of December 31, 2021 459,441 1.17-83.30 42.18 1.36 4.31 Vested and expected to vest as of December 31, 2021 459,441 $1.17-$83.30 $ 42.18 1.36 $ 4.31 F-29 The total intrinsic value of options exercised during the years ended December 31, 2021, 2020, and 2019 was $ 14,524 , $ 494 , and $ 7,910 , respectively. As of December 31, 2021, all stock-based compensation expense for options granted under the Plans was recognized. Stock incentive awards The Company grants restricted stock units (RSUs) and restricted stock awards (RSAs) under the 2014 Plan (Stock Awards). The Stock Awards vest either based solely on the satisfaction of time-based service conditions or on the satisfaction of time-based service conditions combined with performance criteria. Stock Awards are subject to forfeiture if the holder’s services to the Company terminate before vesting. Stock Awards granted with only time-based service vesting conditions generally vest over a four-year service period, as defined in the terms of each award. Stock Awards that vest based on the satisfaction of time-based service conditions combined with performance criteria generally vest over a three-year service and performance period, based on performance criteria established at the time of the award. The portion of the Stock Award that is earned may equal or be less than the targeted number of shares subject to the Stock Award depending on whether the performance criteria are met. F-30 Stock Awards activity for the years ended December 31, 2021, 2020 and 2019 is summarized below: Weighted- average grant Performance date fair and value Restricted stock units Time-based time-based Total per share Unvested restricted stock units as of December 31, 2018 (1) 58,589 $ 8,739 67,328 $ 115.16 Granted 87,902 — 87,902 75.56 Vested ( 24,680 ) ( 4,366 ) ( 29,046 ) 123.53 Forfeited/canceled ( 12,835 ) ( 1,239 ) ( 14,074 ) 102.89 Unvested restricted stock units as of December 31, 2019 (1) 108,976 3,134 112,110 $ 83.48 Unvested and expected to vest restricted stock units outstanding as of December 31, 2019 103,087 $ 83.22 Unvested restricted stock units as of December 31, 2019 108,976 3,134 112,110 $ 83.48 Granted 210,622 88,458 299,080 43.52 Vested ( 49,636 ) — ( 49,636 ) 83.31 Forfeited/canceled ( 24,500 ) ( 3,134 ) ( 27,634 ) 70.60 Unvested restricted stock units as of December 31, 2020 (1) 245,462 88,458 333,920 $ 49.29 Unvested and expected to vest restricted stock units outstanding as of December 31, 2020 246,420 $ 49.82 Unvested restricted stock units as of December 31, 2020 245,462 88,458 333,920 $ 49.29 Granted 240,044 88,902 328,946 56.01 Vested ( 109,504 ) — ( 109,504 ) 52.79 Forfeited/canceled ( 86,836 ) ( 78,248 ) ( 165,084 ) 46.88 Unvested restricted stock units as of December 31, 2021 (1) 289,166 99,112 388,278 $ 54.81 Unvested and expected to vest restricted stock units outstanding as of December 31, 2021 331,358 $ 54.98 Weighted- average grant Performance date fair and value Restricted stock awards Time-based time-based Total per share Unvested restricted stock awards outstanding as of December 31, 2018 (1) 36,937 47,821 84,758 $ 115.80 Granted 54,853 40,166 95,019 86.10 Vested ( 13,627 ) ( 15,732 ) ( 29,359 ) 115.37 Forfeited/canceled ( 7,093 ) ( 9,627 ) ( 16,720 ) 109.11 Unvested restricted stock awards outstanding as of December 31, 2019 (1) 71,070 62,628 133,698 $ 95.74 Unvested and expected to vest restricted stock awards outstanding as of December 31, 2019 79,473 $ 90.31 Unvested restricted stock awards outstanding as of December 31, 2019 71,070 62,628 133,698 $ 95.74 Vested ( 28,994 ) — ( 28,994 ) 89.37 Forfeited/canceled — ( 29,273 ) ( 29,273 ) 110.27 Unvested restricted stock awards outstanding as of December 31, 2020 (1) 42,076 33,355 75,431 $ 93.96 Unvested and expected to vest restricted stock awards outstanding as of December 31, 2020 44,159 $ 85.90 Unvested restricted stock awards outstanding as of December 31, 2020 42,076 33,355 75,431 $ 93.96 Vested ( 15,728 ) — ( 15,728 ) 91.17 Forfeited/canceled ( 15,932 ) ( 27,726 ) ( 43,658 ) 98.05 Unvested restricted stock awards outstanding as of December 31, 2021 (1) 10,416 5,629 16,045 $ 87.12 Unvested and expected to vest restricted stock awards outstanding as of December 31, 2021 15,532 $ 90.08 (1 ) Outstanding restricted stock units and restricted stock awards are based on the maximum payout of the targeted number of shares. F-31 As of December 31, 2021, the unrecognized compensation cost related to unvested employee restricted stock units and restricted stock awards was $ 13,685 , excluding estimated forfeitures. This amount is expected to be recognized over a weighted-average period of 2.5 years. Employee stock purchase plan The Company’s 2014 Employee Stock Purchase Plan (ESPP) provides for the grant to all eligible employees an option to purchase stock under the ESPP, within the meaning Section 423 of the Internal Revenue Code. The ESPP permits participants to purchase common stock through payroll deductions of up to 15 % of their eligible compensation, which includes a participant’s base straight time gross earnings, incentive compensation, bonuses, overtime and shift premium, but exclusive of payments for equity compensation and other similar compensation. A participant may purchase a maximum of 1,500 shares during a purchase period. Amounts deducted and accumulated by the participant are used to purchase shares of the Company’s common stock at the end of each six-month period. The purchase price of the shares will be 85 % of the lower of the fair market value of the Company’s common stock on the first trading day of each offering period or on the exercise date. 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 December 31, 2021, a total of 569,866 shares of common stock were available for sale pursuant to the ESPP. The number of shares available for sale under the ESPP is increased annually on the first day of each fiscal year equal to the least of: • 179,069 shares; • 1.5 % of the outstanding shares of the Company’s common stock on the last day of the Company’s immediately preceding fiscal year; or • such other amount as may be determined by the administrator. For 2021, no additional shares were added to the ESPP share reserve pursuant to the provision described above. Stock-based compensation Stock-based compensation expense recognized for the years ended December 31, 2021, 2020 and 2019, was as follows: (amounts in thousands) Years ended December 31, Stock-based compensation expense by type of award: 2021 2020 2019 Stock option plan awards $ — $ 709 $ 2,977 Restricted stock units and restricted stock awards 10,229 6,717 5,413 Employee stock purchase plan 714 777 739 Total stock-based compensation expense $ 10,943 $ 8,203 $ 9,129 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 years ended December 31, 2020 and 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 years ended December 31, 2021, 2020 and 2019 has been reduced for estimated forfeitures of restricted stock at a rate of 4.1 %, 4.7 % and 4.4 %, 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. F-32 For the years ended December 31, 2021, 2020 and 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: Years ended December 31, (amounts in thousands) 2021 2020 2019 Cost of revenue $ 1,106 $ 698 $ 890 Research and development 1,276 969 1,100 Sales and marketing 2,388 2,208 1,755 General and administrative 6,173 4,328 5,384 Total stock-based compensation expense $ 10,943 $ 8,203 $ 9,129 Valuation assumptions The employee stock-based compensation expense is recognized under ASC 718. Stock-based compensation cost for stock awards is based on the number of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the employee’s requisite service period for stock awards with a time-based service condition and on a graded vesting basis over the employee’s requisite service period for stock awards with performance and time-based service conditions. Stock-based compensation cost for stock options and employee stock purchase plan are determined at the grant date using the Black-Scholes option pricing model. During the years ended December 31, 2021, 2020 and 2019, the Company did not grant any stock option awards. The following table displays the assumptions that have been applied to estimate the fair value of the Company’s shares to be issued under the ESPP using the Black-Scholes option pricing model. 2021 2020 2019 Expected term (years) 0.50 0.50 0.50 Risk free interest rate 0.07-0.12% 0.12-1.75% 1.75-2.53% Expected dividend yield None None None Volatility 44.59-83.92% 47.00-83.92% 44.00-47.00% 401(k) retirement savings plan The Company maintains a 401(k) retirement savings plan for the benefit of eligible employees. Under the terms of this plan, eligible employees are able to make contributions to the plan on a tax-deferred basis. The Company matched employees’ contributions from January 1, 2017 through June 30, 2020. The Company suspended its 401(k) match, effective July 1, 2020; however, matching contributions were reinstated on June 21, 2021. The Company contributed $ 479 , $ 455 , and $ 871 , net of forfeitures, to the 401(k) plan for the years ended December 31, 2021, 2020 and 2019, respectively. 8. Commitments and contingencies Purchase obligations The Company had approximately $ 111,100 of outstanding purchase orders due within one year with its outside vendors and suppliers as of December 31, 2021. F-33 Warranty obligation The following table identifies the changes in the Company’s aggregate product warranty liabilities for the years ended December 31, 2021, 2020 and 2019, respectively: December 31, (amounts in thousands) 2021 2020 2019 Product warranty liability at beginning of period $ 14,394 $ 12,571 $ 9,530 Accruals for warranties issued 9,168 9,462 8,131 Adjustments related to preexisting warranties (including changes in estimates) ( 597 ) ( 754 ) 1,433 Settlements made (in cash or in kind) ( 9,239 ) ( 6,885 ) ( 6,523 ) Product warranty liability at end of period $ 13,726 $ 14,394 $ 12,571 Legislation and HIPAA The healthcare industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government healthcare program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Government activity has continued with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violations of these laws and regulations could result in exclusion from government healthcare programs together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. The Company believes that it is in compliance in all material respects with applicable fraud and abuse regulations and other applicable government laws and regulations. Compliance with such laws and regulations can be subject to future government review and interpretation as well as regulatory actions unknown or unasserted at this time. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was enacted to ensure health insurance portability, reduce healthcare fraud and abuse, guarantee security and privacy of health information, and enforce standards for health information. The Health Information Technology for Economic and Clinical Health Act (HITECH Act), in part, imposes notification requirements of certain security breaches relating to protected health information. The Company believes that it complies in all material respects with the provisions of those regulations that are applicable to the Company’s business. Legal proceedings Securities class action and derivative lawsuits On March 6, 2019, plaintiff William Fabbri filed a lawsuit against Inogen, Scott Wilkinson, and Alison Bauerlein, in the United States District Court for the Central District of California on behalf of a purported class of purchasers of the Company’s securities. On March 21, 2019, plaintiff Steven Friedland filed a substantially similar lawsuit against the same defendants in the same court. On May 20, 2019, the court issued an order consolidating the two lawsuits under the name In re Inogen, Inc. Sec. Litig., No. 2:19-cv-01643-FMO-AGR, appointing Dr. John Vasil and Paragon Fund Management as lead plaintiffs, and appointing Robbins Geller Rudman & Dowd LLP and Glancy Prongay & Murray LLP as lead plaintiffs’ counsel. On July 10, 2019, the lead plaintiffs filed a consolidated amended complaint on behalf of a purported class of purchasers of the Company’s common stock between November 8, 2017 and May 7, 2019. The complaint generally alleges that the defendants failed to disclose that: (i) Inogen had overstated the true size of the total addressable market for its portable oxygen concentrators and had misstated the basis for its calculation of the total addressable market; (ii) Inogen had falsely attributed its sales growth to the strong sales acumen of its sales force, rather than to deceptive sales practices; (iii) the growth in Inogen’s domestic business-to-business sales to home medical equipment providers was inflated, unsustainable and was eroding direct-to-consumer sales; and (iv) Inogen’s decision to focus on sales over rentals of portable oxygen concentrators harmed its ability to serve the Medicare market, in violation of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. The complaint seeks compensatory damages in an unspecified amount, costs and expenses, including attorneys’ fees and expert fees, prejudgment and post-judgment interest and such other relief as the court deems proper. O n January 2, 2020, the court dismissed the consolidated amended complaint with leave to amend. On January 9, 2020, the plaintiffs filed a second amended complaint generally alleging substantially similar claims as those in the previous complaint. 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. On August 13, 2021, the court granted Defendants’ motion to dismiss, and on September 27, 2021, the court entered judgment dismissing the action in its entirety. F-34 On June 26, 2019, plaintiff Twana Brown filed a shareholder derivative lawsuit against Inogen, Scott Wilkinson, Alison Bauerlein, Benjamin Anderson-Ray, Scott Beardsley, R. Scott Greer, Raymond Huggenberger, Heath Lukatch, Loren McFarland, and Heather Rider in the United States District Court for the Central District of California. The complaint purports to bring claims on behalf of Inogen against the individual defendants for breaches of their fiduciary duties as directors and/or officers of Inogen, unjust enrichment, waste of corporate assets and violations of section 14(a) of the Securities Exchange Act of 1934, as amended. The complaint generally alleges similar claims to the securities class action. The complaint seeks compensatory damages and restitution in an unspecified amount, changes to the Company’s corporate governance and internal procedures, costs and expenses, including attorneys’ fees and expert fees, and such other relief as the court deems proper. On August 5, 2019, the court issued an order staying the derivative action pending the resolution of the motion to dismiss stage in In re Inogen, Inc. Sec. Litig . Between October 7, 2019 and October 31, 2019, three additional shareholder derivative complaints were filed in the United States District Court for the Central District of California based on similar factual allegations. These lawsuits purport to bring claims on behalf of Inogen for breach of fiduciary duty, unjust enrichment, waste of corporate assets, insider trading and misappropriation of information, and violations of section 14(a) of the Securities Exchange Act of 1934, as amended. On January 13, 2020, the court consolidated the four derivative lawsuits before it under the name In re Inogen, Inc. S’holder Deriv. Litig. , Lead Case No. 2:19-cv-5568-FMO-AGR and ordered that the consolidated action be stayed pending the resolution of the motion to dismiss stage in In re Inogen, Inc., Sec. Litig. On November 10, 2021, the plaintiffs filed a Notice of Voluntary Dismissal Without Prejudice. On February 8, 2022, the court dismissed the California derivative action without prejudice. On September 13, 2019, plaintiff Dustin Weller filed a shareholder derivative lawsuit against Inogen, Scott Wilkinson, Alison Bauerlein, Benjamin Anderson-Ray, Scott Beardsley, R. Scott Greer, Raymond Huggenberger, Heath Lukatch, Loren McFarland, and Heather Rider in the United States District Court for the District of Delaware captioned Weller v. Wilkinson, et al. , No. 1:19-cv-01723-MN. On October 17, 2019, plaintiff Sharokh Soltanipour filed a shareholder derivative lawsuit against the same defendants in the same court, captioned Soltanipour v. Wilkinson, et al. , No. 1:19-cv-1968-MN. The complaints generally allege similar claims to those in In re Inogen, Inc., S’holder Deriv. Litig. The complaints purport to bring claims on behalf of Inogen for breach of fiduciary duty, unjust enrichment, waste of corporate assets, abuse of control, gross mismanagement, insider selling and misappropriation of information, violations of section 14(a) of the Securities Exchange Act of 1934, as amended, and for contribution from certain of the individual defendants. The complaints seek compensatory damages in unspecified amounts, changes to the Company’s corporate governance and internal procedures, return of compensation, disgorgement of profits from sale of stock, costs and expenses, including attorneys’ fees and expert fees, and such other relief as the court deems proper. On May 15, 2020, the court consolidated the two derivative lawsuits before it under the name In re Inogen, Inc. S’holder Deriv. Litig. , Lead Case No. 1:19-cv-01723-MN-JLH. 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. Litig . On November 3, 2021, the court approved the parties’ stipulation to voluntarily dismiss the Delaware derivative action without prejudice. Other litigation In addition to the lawsuits discussed above, the Company is party to various legal proceedings arising in the normal course of business. The Company carries insurance, subject to specified deductibles under the policies, to protect against losses from certain types of legal claims. At this time, the Company does not anticipate that any of these other proceedings arising in the normal course of business will have a material adverse effect on the Company’s business. 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. 9. Foreign currency exchange contracts and hedging As of December 31, 2021 and December 31, 2020, the Company’s total non-designated and designated derivative contracts had notional amounts totaling approximately $ 2,318 and $ 23,253 , respectively, and $ 0 and $ 16,303 , respectively. These contracts were comprised of offsetting contracts with the same counterparty, each expires within one to twelve months . During the years ended December 31, 2021, 2020, and 2019, these contracts had, net of tax, unrealized gains of $ 1,793 , and unrealized losses of $ 289 and $ 694 , 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 years ended December 31, 2021, 2020 and 2019, there were no ineffective portions relating to these hedges and the hedges remained effective through their respective settlement dates. As of December 31, 2021, the Company had thirteen designated hedges and two non-designated hedges. As of December 31, 2020, the Company had seventeen designated hedges and no non-designated hedges. F-35 Schedule II: Valuation and Qualifying Accounts Balance at Beginning Balance at (amounts in thousands) of Year Additions Deletions End of Year Year ended December 31, 2021 Allowance for doubtful accounts (1) $ 52 $ 60 $ 60 $ 52 Allowance for sales returns (2) 742 11,034 10,966 810 Allowance for rental asset loss (3) 575 1,153 438 1,290 Year ended December 31, 2020 Allowance for doubtful accounts (1) $ 205 $ 187 $ 340 $ 52 Allowance for sales returns (2) 1,163 10,299 10,720 742 Allowance for rental revenue adjustments (4) 411 2,579 2,594 396 Allowance for rental asset loss (3) 395 559 379 575 Year ended December 31, 2019 Allowance for doubtful accounts (1) $ 693 $ 612 $ 1,100 $ 205 Allowance for sales returns (2) 890 17,036 16,763 1,163 Allowance for rental revenue adjustments (4) 438 1,762 1,789 411 Allowance for rental asset loss (3) 594 188 387 395 (1) The additions to the allowance for doubtful accounts represent the estimates of bad debt expense based upon factors for which the company evaluates the collectability of accounts receivable, with actual recoveries netted into additions. Deductions are the actual write-offs of the receivables. (2) The additions to the allowance for sales returns represent estimates of returns based upon historical returns experience, primarily for the direct-to-consumer sales channel. Deductions are the actual returns of products. (3) The additions to the allowance for rental asset loss represent estimated losses of the Company’s rental assets that will potentially be unrecoverable from the patient. Deductions are the actual write-offs of the rental assets. ( 4 ) The additions to the allowance for rental revenue adjustments represent estimates of revenue adjustments that will need to be recorded for billing adjustments on rental revenue, net of recoveries. Deductions are the actual adjustments and write-offs of the rental receivables for such revenue adjustments. F-36 EXHIBIT INDEX Exhibit Number Description Incorporated by Reference From Form Incorporated by Reference From Exhibit Number Date Filed 2.1 Agreement and Plan of Merger dated August 6, 2019, by and among Inogen, Inc., Move Merger Sub, Inc., New Aera, Inc. and Gregory J. Kapust, as the entitled holders’ agent. 8-K 2.1 08/07/19 3.1 Thirteenth Amended and Restated Certificate of Incorporation of the Registrant. 10-K 3.1 02/25/20 3.2 Amended and Restated Bylaws of the Registrant. 10-K 3.2 02/25/20 4.1 Specimen Common Stock Certificate of the Registrant. S-1/A 4.1 01/16/14 4.2 Ninth Amended and Restated Investors’ Rights Agreement, dated March 12, 2012, by and among the Registrant and the investors named therein, as amended. S-1/A 4.2 01/16/14 4.3 Amendment No. 2 to Ninth Amended and Restated Investor Rights Agreement, dated December 10, 2018. 10-K 4.3 02/26/19 4.4 Description of Securities. 10-K 4.4 02/25/20 10.1+ Form of Director and Executive Officer Indemnification Agreement. S-1 10.1 11/27/13 10.2+ 2002 Stock Plan, as amended. S-1 10.2 11/27/13 10.3+ Form of Notice of Stock Option Grant and Stock Option Agreement under the 2002 Stock Plan, as amended. S-1 10.3 11/27/13 10.4+ 2012 Equity Incentive Plan, as amended. S-1 10.4 11/27/13 10.5+ Form of Stock Option Agreement under the 2012 Equity Incentive Plan. S-1 10.5 11/27/13 10.6+ 2014 Equity Incentive Plan. S-1/A 10.6 01/28/14 10.7A+ Form of Stock Option Agreement under the 2014 Equity Incentive Plan. 10-Q 10.1 11/07/17 10.7B+ Form of Restricted Stock Unit Agreement – Time-Based under the 2014 Equity Incentive Plan. 10-Q 10.2 11/07/17 10.7C+ Form of Restricted Stock Unit Agreement – Performance-Based under the 2014 Equity Incentive Plan. 10-Q 10.3 11/07/17 10.7D+ Form of Restricted Stock Award Agreement – Time-Based under the 2014 Equity Incentive Plan. 10-Q 10.4 11/07/17 10.7E+ Form of Restricted Stock Award Agreement – Performance-Based under the 2014 Equity Incentive Plan. 10-Q 10.5 11/07/17 10.8+ 2014 Employee Stock Purchase Plan. S-1/A 10.8 01/28/14 10.9+ Executive Incentive Compensation Plan. S-1 10.9 11/27/13 10.10+ Amended and Restated Employment and Severance Agreement, effective March 1, 2017, between the Registrant and Scott Wilkinson. 10-K 10.11 02/28/17 10.11+ Employment Agreement, dated October 1, 2013, between the Registrant and Alison Bauerlein. S-1/A 10.12 12/23/13 10.12+ Employment Agreement, dated October 1, 2013, between the Registrant and Matt Scribner. S-1/A 10.13 12/23/13 10.13+ Employment Agreement, dated October 1, 2013, between the Registrant and Brenton Taylor. S-1/A 10.14 12/23/13 94 Exhibit Number Description Incorporated by Reference From Form Incorporated by Reference From Exhibit Number Date Filed 10.14 Multi-Purpose Commercial Building Lease, dated February 1, 2010, between the Registrant and Rockbridge Investments, L.P., as amended. S-1 10.17 11/27/13 10.15 Lease Agreement, dated May 3, 2012, between the Registrant and Bayview (TX) Holding LLC. S-1 10.18 11/27/13 10.16 License Agreement, dated July 23, 2007, between the Registrant and Air Products and Chemicals, Inc. S-1/A 10.19 12/23/13 10.17 Amendment to License Agreement, dated October 23, 2009, between the Registrant and Air Products and Chemicals, Inc. S-1 10.20 11/27/13 10.18 Amendment No. 2 to License Agreement, dated October 4, 2010, between the Registrant and Air Products and Chemicals, Inc. S-1 10.21 11/27/13 10.19 Amendment No. 3 to License Agreement, dated March 22, 2011, between the Registrant and Air Products and Chemicals, Inc. S-1 10.22 11/27/13 10.20 Lease Agreement, dated December 4, 2014, between the Registrant and TCIT Dallas Industrial, Inc. 10-K 10.23 04/27/15 10.21 Second Amendment to lease, dated January 20, 2015, between Registrant and Rockbridge Investments, L.P. 10-Q 10.1 05/12/15 10.22+ Amended and Restated Employment and Severance Agreement, effective January 1, 2017, between the Registrant and Byron Myers. 10-K 10.28 02/28/17 10.23 First Amendment and Expansion of Premises entered into as of November 9, 2015, by and between Registrant and ATLAS 35-75 INDUSTRIAL, LP. 8-K 10.1 11/10/15 10.24* Private Label Distribution Agreement, effective as of November 12, 2014, between the Registrant and Applied Home Healthcare Equipment LLC, as amended. 10-Q 10.1 11/03/16 10.25* Addendum to Private Label Distribution Agreement between the Company and Applied Home Healthcare Equipment LLC, as amended. 10-Q 10.1 05/09/17 10.26* First Amendment to Private Label Distribution Agreement by and between the Company and Applied Home Healthcare Equipment, LLC, dated as of February 21, 2018. 10-Q 10.1 04/30/18 10.27* Second Amendment to Private Label Distribution Agreement by and between the Company and OxyGo HQ, LLC, formerly known as Applied Home Healthcare Equipment, LLC, dated as of March 1, 2019. 10-Q 10.1 05/07/19 10.28 Lease Agreement by and between the Company, Cleveland American, LLC and Holdings Cleveland American, LLC, dated as of May 31, 2017. 10-Q 10.1 08/07/18 10.29 First Amendment to Lease Agreement between the Company, Cleveland American, LLC and Holdings Cleveland American, LLC, dated as of January 10, 2018. 10-Q 10.2 08/07/18 10.30 Second Amendment to Lease Agreement between the Company, Cleveland American, LLC and Holdings Cleveland American, LLC, dated as of May 1, 2018. 10-Q 10.3 08/07/18 10.31 Lease Agreement, dated June 19, 2019, by and between the Company, and RAF Pacifica Group – Real Estate Fund IV, LLC, APG Hollywood Center, LLC, and APG Airport Freeway Center, LLC. 10-Q 10.1 08/07/19 10.32 Lease Agreement, dated August 29, 2019, by and between the Company, and TCG Industrial Shiloh LLC. 10-Q 10.1 11/05/19 95 Exhibit Number Description Incorporated by Reference From Form Incorporated by Reference From Exhibit Number Date Filed 10.33 Lease Agreement Amendment No. 1, dated November 1, 2019, by and between the Company, and TCG Industrial Shiloh LLC. 10-Q 10.2 11/05/19 10.34+ Transition Agreement and Release by and between the Company and Matthew Scribner, dated September 14, 2018. 8-K 10.1 09/17/18 10.35+ Employment and Severance Agreement, dated August 17, 2018, between the Registrant and Bart Sanford. 10-Q 10.2 11/06/18 10.36 Third Amendment to lease, dated July 14, 2020, between Registrant and Rockbridge Investments, L.P. 10-Q 10.1 08/04/20 10.37+ Employment and Severance Agreement, dated August 17, 2020, between the Company and Arron Retterer . 10-Q 10.1 11/04/20 10.38+ Employment and Severance Agreement between the Company and Nabil Shabshab, dated January 22, 2021. 8-K 10.1 01/25/21 10.39+ Transition Agreement and Release by and between the Company and Scott Wilkinson, dated January 22, 2021. 10-K 10.39 02/24/21 10.40 First Amendment to Agreement and Plan of Merger, dated August 6, 2019 between the Company and New Aera, dated January 18, 2021. 10-K 10.40 02/24/21 10.41+ Transition Agreement and Release between the Company and Arron Retterer, dated April 5, 2021. 8-K 10.1 04/07/21 10.42+ Transition Agreement and Release between the Company and Byron Myers, dated April 5, 2021. 8-K 10.2 04/07/21 10.43+ Employment and Severance Agreement between the Company and George Parr, dated April 12, 2021. 10-Q 10.6 05/04/21 10.44+ Employment and Severance Agreement, between the Company and Stanislav Glezer, dated June 21, 2021. 10-Q 10.1 08/04/21 10.45+ Employment and Severance Agreement, between the Company and Jason M. Somer, dated July 12, 2021. 10-Q 10.2 08/04/21 10.46 First Amendment to Lease dated as of June 17, 2021, by and between the Company and RAF Pacifica Group – Real Estate Fund IV, LLC, APG Hollywood Center, LLC and APG Airport Freeway Center, LLC. 10-Q 10.1 11/04/21 10.47* Private Label Distribution Agreement, by and between the Company and OxyGo HQ Florida, LLC, dated as of September 23, 2021. 10-Q 10.2 11/04/21 10.48+ Transition Agreement and Release, dated September 30, 2021, between the Company and Brenton Taylor. 10-Q 10.3 11/04/21 10.49+ Amended and Restated Employment and Severance Agreement, dated October 11, 2021, between the Company and Stanislav Glezer. 10-Q 10.4 11/04/21 10.50+ Offer Letter by and between the Company and Michael K. Sergesketter, dated December 10, 2021. 8-K 10.1 12/13/21 10.51+ Transition Agreement and Release between the Company and Alison Bauerlein, dated December 10, 2021. 8-K 10.2 12/13/21 10.52+ Consulting Agreement by and between the Company and Raymond Huggenberger, effective December 29, 2021. 8-K 10.1 12/30/21 23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. Filed Herewith 24.1 Powers of Attorney (contained in the signature page to this Annual Report on Form 10-K). Filed Herewith 96 Exhibit Number Description Incorporated by Reference From Form Incorporated by Reference From Exhibit Number Date Filed 31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith 31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed Herewith 32.1~ Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed Herewith 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Document 104 The cover page of this Annual Report on Form 10-K, formatted in inline XBRL. + Indicates a management contract or compensatory plan. * Portions of the exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K. The Company agrees to furnish to the Securities and Exchange Commission a copy of any omitted portions of the exhibit upon request. ~ The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Inogen, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. 97 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INOGEN, INC. (Registrant) By: /s/ Nabil Shabshab Nabil Shabshab Chief Executive Officer President Director (Principal Executive Officer) Dated: February 24, 2022 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Nabil Shabshab and Michael Sergesketter, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Nabil Shabshab Chief Executive Officer, President and Director February 24, 2022 Nabil Shabshab (Principal Executive Officer) /s/ Michael Sergesketter Chief Financial Officer February 24, 2022 Michael Sergesketter (Principal Accounting and Financial Officer) /s/ Elizabeth Mora Chairperson of the Board February 24, 2022 Elizabeth Mora /s/ Heath Lukatch, Ph.D. Director February 24, 2022 Heath Lukatch, Ph.D. /s/ Benjamin Anderson-Ray Director February 24, 2022 Benjamin Anderson-Ray /s/ Heather Rider Director February 24, 2022 Heather Rider /s/ Loren McFarland Director February 24, 2022 Loren McFarland /s/ Kristen Miranda Director February 24, 2022 Kristen Miranda 98