What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-03-01 · 251 added, 222 removed, 794 unchanged (37% of the section changed)

2 unchanged sentences

INDEX TO THE FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (BDO USA, LLP, San Francisco, California, PCAOB ID# 243 )

Report of Independent Registered Public Accounting Firm (BDO USA, P.C., San Francisco, California, PCAOB ID# 243 )

Financial Statements

9 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Pulmonx Corporation (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Pulmonx Corporation (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

15 unchanged sentences

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated 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.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Classification

Inventory totaled approximately $19.8 million at December 31, 2022, including approximately $5.3 million classified as long-term.

As described in Note 2 to the Company’s financial statements, the value of inventories not expected to be realized in cash, sold or consumed during the next 12 months are classified as long-term inventory.

Inventory totaled approximately $19.3 million at December 31, 2023, including approximately $2.6 million classified as long-term inventory.

As described in Note 2 to the Company’s financial statements, the value of inventories not expected to be realized in cash, sold or consumed during the next 12 months are classified as long-

term inventory.

Management considers forecasted demand and other expected usage of inventory on hand when estimating long-term inventory.

We identified management’s estimation of long-term inventory as a critical audit matter.

We identified management’s estimation of forecasted demand for products used in the determination of long-term inventory classification to be a critical audit matter.

Management is required to make significant judgments and assumptions with respect to future demand for the Company’s products that affect the estimation of long-term inventory.

Auditing these elements involved especially challenging and subjective auditor judgment due to the significance and subjectivity of management’s judgments.

Auditing these elements involved especially challenging and subjective auditor judgment and an increased extent of effort.

The primary procedures we performed to address this critical audit matter included:

• Assessing the reasonableness of management’s forecasted demand for products, by (i) comparing forecasts to historical sales of the Company’s products, (ii) performing a lookback analysis to compare the Company’s historical estimates of future demand to actual sales results for the same period, (iii) evaluating whether such assumptions were consistent with evidence obtained in other areas of the audit, and (iv) assessing whether any known or knowable factors occurred subsequent to year end that impact management’s forecast of future inventory usage.

/s/ BDO USA, LLP

• Evaluating management’s ability to accurately forecast the future demand for products by performing a retrospective comparison of the Company’s prior forecasts to actual results for the same period.

• Evaluating the reasonableness of management’s forecasted demand for products, by comparing forecasts to (i) historical sales of the Company’s products, and (ii) forecasted information included in Company’s press releases.

• Evaluating whether forecasted demand for products is consistent with evidence obtained in other areas of the audit.

• Assessing whether any known or knowable factors occurred subsequent to year end that impact management’s forecast of future inventory usage.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2011.

San Francisco, California

March 1, 2023

February 27, 2024

Pulmonx Corporation

30 unchanged sentences

Long-term debt 35,089 17,234

Other long-term liabilities — 179

Total liabilities 59,466 39,669

31 unchanged sentences

Currency translation adjustment 671 150

Change in unrealized losses on marketable securities ( 287 ) ( 24 )

Change in unrealized gain (losses) on marketable securities 394 ( 287 )

Total other comprehensive income (loss) 1,065 ( 137 )

14 unchanged sentences

Shares Amount

Balances at January 1, 2021 35,693,753 $ 36 $ 467,147 $ 1,685 $ ( 242,734 ) $ 226,134

Issuance of common stock upon vesting of restricted stock unit 40,908 — — — — —

Balances at December 31, 2021 36,931,762 $ 37 $ 482,885 $ 1,712 $ ( 291,395 ) $ 193,239

Issuance of common stock upon vesting of restricted stock units 251,133 — — — — —

Issuance of common stock upon exercise of stock options 297,463 1 634 — — 635

Issuance of shares pursuant to Employee Stock Purchase Plan 89,666 — 1,942 — — 1,942

Repurchase of early exercised common stock options ( 14,459 ) — — — — —

Change in shares subject to repurchase — — 227 — — 227

Issuance of shares pursuant to Employee Stock Purchase Plan 144,479 — 2,652 — — 2,652

Stock-based compensation expense — — 17,024 — — 17,024

10 unchanged sentences

Currency translation adjustment — — — 671 — 671

Change in unrealized losses on marketable securities — — — ( 287 ) — ( 287 )

Change in unrealized gains on marketable securities — — — 394 — 394

Net loss — — — — ( 60,843 ) ( 60,843 )

9 unchanged sentences

Stock-based compensation expense 22,101 16,445

Write-off of fixed assets 7 7

Allowance for doubtful accounts 54 4

(Gain) loss on disposal of fixed assets ( 15 ) 7

Change in allowance for credit losses ( 59 ) 54

Inventory write-downs 507 485

1 unchanged sentence

Amortization of debt discount and debt issuance costs 48 56

Amortization of premiums and discounts on marketable securities ( 204 ) 59

Net accretion of discounts on marketable securities ( 1,025 ) ( 204 )

Non-cash lease expense 2,686 2,498

17 unchanged sentences

Cash flows from financing activities

Proceeds from borrowing under term loan 20,000 —

Repayment of credit agreement ( 94 ) ( 87 )

Debt issuance cost ( 53 ) ( 41 )

Payments of debt issuance cost — ( 53 )

Proceeds from exercise of common stock options 310 644

2 unchanged sentences

Net cash provided by financing activities 21,400 2,419

Effect of exchange rate changes on cash and cash equivalents 145 106

Net decrease in cash and cash equivalents ( 46,744 ) ( 83,081 )

Cash and cash equivalents at beginning of year 148,711 231,792

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 34 145

Net decrease in cash, cash equivalents, and restricted cash ( 18,183 ) ( 46,744 )

Cash, cash equivalents, and restricted cash at beginning of year 101,967 148,711

Cash, cash equivalents, and restricted cash at end of year $ 83,784 $ 101,967

6 unchanged sentences

Purchases of property and equipment in accounts payable and accrued liabilities $ 109 $ 425

Operating lease right of use assets obtained in exchange for new lease liabilities $ 229 $ 1,460

Amount receivable from exercise of Options $ — $ 10

Amount receivable from exercise of common stock options $ 3 $ —

Supplemental disclosure of cash flow information:

9 unchanged sentences

The Company has subsidiaries in Germany, Switzerland, Australia, the United Kingdom, Italy, France, Hong Kong and Japan.

Initial Public Offering

On September 30, 2020, the Company’s registration statement on Form S-1 (File No.

333-248635) relating to its initial public offering (“IPO”) of common stock became effective.

The IPO closed on October 5, 2020 at which time the Company issued 11,500,000 shares of its common stock at a price of $ 19.00 per share, which included the issuance of shares in connection with the exercise by the underwriters of their option to purchase up to 1,500,000 additional shares.

The Company received an aggregate of $ 218.5 million gross proceeds, before underwriting discounts, commissions and offering costs, and approximately $ 201.4 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

In connection with the completion of its IPO, on October 5, 2020, the Company’s certificate of incorporation was amended and restated to provide for 200,000,000 authorized shares of common stock with a par value of $ 0.001 per share and 10,000,000 authorized shares of preferred stock with a par value of $ 0.001 per share.

Liquidity and Going Concern

5 unchanged sentences

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

Impact of the COVID-19 Pandemic

The COVID-19 pandemic has delayed clinical trials and the U.S.

Food and Drug Administration operations and adversely impacted the number of procedures performed using our products.

As a result, the COVID-19 pandemic and the measures taken by many countries in response have materially adversely affected, and could in the future materially adversely affect, our business, financial condition and results of operations, as well as the price of our common stock, from a decrease and delay of procedures involving our products.

While the Company has seen a recovery in procedure volumes in the U.S.

and some international markets, other international markets continue to be hampered by a slower recovery.

The Company may continue to see regional variations in procedure volumes in the U.S.

and international markets due to the COVID-19 pandemic and its variants.

Pulmonx Corporation

Notes to Consolidated Financial Statements

The Company’s consolidated financial statements reflect judgments and estimates that could change in the future as a result of the COVID-19 pandemic.

The COVID-19 pandemic has adversely impacted the Company’s business, financial condition and results of operations by decreasing and delaying procedures performed using its products.

While procedure volumes in many regions have stabilized, there continues to be variability and uncertainty as variants of the virus emerge.

The Company can make no assurance regarding any future level of demand for the Company’s products, and COVID-19 may adversely impact the results of operations and financial condition.

Summary of Significant Accounting Policies

6 unchanged sentences

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

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 periods.

Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

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

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

Pulmonx Corporation

Notes to Consolidated Financial Statements

Fair Value of Financial Instruments

7 unchanged sentences

Restricted cash for years ended December 31, 2023 and December 31, 2022 consists of collateral for letters of credit issued in connection with the real estate lease in Redwood City, California.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Marketable Securities

2 unchanged sentences

After consideration of the Company’s risk versus reward objectives and liquidity requirements, the Company may sell these securities prior to their stated maturities.

As the Company views these securities as available to support current operations, the Company classifies highly liquid securities with original maturities greater than three months at the time of purchase as short-term marketable securities and those with original maturities greater than twelve months at the time of purchase as long-term marketable securities on the consolidated balance sheets.

As the Company views these securities as available to support current operations, the Company classifies highly liquid securities with original maturities greater than three months at the time of purchase, and remaining maturities of less than one year, as short-term marketable securities and those with remaining maturities greater than twelve months as long-term marketable securities on the consolidated balance sheets.

These securities are carried at fair value as determined based upon quoted market prices or pricing models for similar securities.

Unrealized gains and losses on available for sale marketable securities, which consist of debt securities, if any, are excluded from earnings and are reported as a component of accumulated other comprehensive income (loss).

Unrealized gains and losses on available for sale marketable securities, which consist of debt securities, if any, are excluded from earnings and are reported as a component of other comprehensive income (loss).

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income on the consolidated statements of operations and comprehensive loss.

2 unchanged sentences

Interest and dividends on securities classified as available-for-sale are included in interest income.

The Company did not identify any of its marketable securities as other-than-temporarily impaired as of December 31, 2022 and 2021.

For marketable securities in an unrealized loss position, the Company periodically assesses its portfolio for impairment.

The assessment first considers the intent or requirement to sell the marketable security.

If either of these criteria are met, the amortized cost basis is written down to fair value through earnings.

Upon the adoption of ASU 2016-13, Financial Instruments – Credit Losses , on January 1, 2023, if the criteria above are not met, the Company evaluates whether the decline resulted from credit losses or other factors by considering the extent to which fair value is less than amortized cost, any changes to the rating of the marketable security by a rating agency, and any adverse conditions specifically related to the marketable security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the marketable security is compared to the amortized cost basis of the marketable security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive loss.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Concentration of Credit Risk

1 unchanged sentence

The Company maintains its cash and cash equivalents balances with established financial institutions and, at times, such balances with any one financial institution may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limits.

As of December 31, 2022 and 2021, the Company also had cash on deposit with foreign banks of approximately $ 4.5 million and $ 4.6 million, respectively, that was not federally insured.

The Company earns revenue from the sale of its products to hospitals and other customers such as distributors.

Sales of Zephyr Valves and delivery catheters accounted for most of the Company’s revenue for the years ended December 31, 2022 and 2021.

As of December 31, 2023 and December 31, 2022, the Company also had cash on deposit with foreign banks of approximately $ 4.7 million and $ 4.5 million, respectively, that was not federally insured.

The Company earns revenue primarily from the sale of its products to hospitals and other customers such as distributors.

Sales of Zephyr Valves and delivery catheters accounted for most of the Company’s revenue for the years ended December 31, 2023 and December 31, 2022.

The Company’s accounts receivable are derived from revenue earned from customers.

The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers.

At December 31, 2022 and 2021, no customer accounted for more than 10% of accounts receivable.

For the years ended December 31, 2022 and 2021, no customer accounted for more than 10% of revenue.

The Company performs ongoing credit evaluations of its customers’ financial conditions and generally requires no collateral from its customers.

As of December 31, 2023 and December 31, 2022, no customer accounted for more than 10% of accounts receivable.

For the years ended December 31, 2023 and December 31, 2022, no customer accounted for more than 10% of revenue.

The Company relies on single source suppliers for the components, sub-assemblies and materials for its products.

2 unchanged sentences

Accounts Receivable and Allowances

Accounts receivable are recorded at the amounts billed less estimated allowances for doubtful accounts.

Accounts receivable are recorded at the amounts billed less estimated allowances for credit losses for any potential uncollectible amounts.

The Company continually monitors customer payments and maintains an allowance for estimated losses resulting from a customer’s inability to make required payments.

The Company considers factors such as historical experience, credit quality, age of the accounts receivable balances, geographic related risks and economic conditions that may affect a customer’s ability to pay.

As of December 31, 2022 and December 31, 2021, accounts receivable is presented net of an allowance for doubtful accounts of $ 0.1 million and less than $ 0.1 million, respectively.

Accounts receivable are written-off and charged against an allowance for credit losses when the Company has exhausted collection efforts without success.

As of December 31, 2023 and December 31, 2022, accounts receivable is presented net of an allowance for credit losses of $ 0 and $ 0.1 million, respectively.

Inventories are valued at the lower of cost to purchase or manufacture the inventory or net realizable value.

Cost is determined using the first-in, first-out method (“FIFO”) for all inventories.

Net realizable value is determined as the

Pulmonx Corporation

Notes to Consolidated Financial Statements

estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

Net realizable value is determined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

The Company records write-downs of inventories which are obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions.

2 unchanged sentences

The value of inventories not expected to be realized in cash, sold or consumed during the next 12 months are classified as long-term inventory.

Internal-Use Software

The Company capitalizes certain costs in connection with obtaining or developing software for internal use.

Amortization of such costs begins when the project is substantially complete and ready for its intended use.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Capitalized software development costs are classified as property and equipment, net on the consolidated balance sheets and are amortized using the straight-line method over the estimated useful life of the applicable software.

Property and Equipment, Net

19 unchanged sentences

Circumstances that could reasonably be expected to negatively affect the key assumptions related to the impairment assessment include but are not limited to, (1) a significant adverse change in legal factors affecting our existing and future products or in business climate, (2) unanticipated competition, (3) an adverse action or assessment by a regulator, or (4) an adverse change in market conditions that are indicative of a decline in the fair value of the assets.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Intangible Assets

1 unchanged sentence

Intangible assets were recorded at their fair values at the date of acquisition and are amortized using the straight-line method over a 15-year useful life (Note 5).

Pulmonx Corporation

Notes to Consolidated Financial Statements

The Company leases facilities and vehicles and meets the requirements to account for these leases as operating leases.

11 unchanged sentences

Variable lease payments are expenses as incurred.

The Company does not recognize lease liabilities and ROU assets for short-term leases with terms of twelve months or less.

Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification.

2 unchanged sentences

Revenue Recognition

The Company’s revenue is generated from the sale of its products to distributors and hospitals in the United States and international markets.

The Company’s revenue is generated primarily from the sale of its products to hospitals and distributors in the United States and international markets.

Under ASC 606, revenue is recognized when the customer obtains controls of promised goods or services, in an amount that reflects consideration which the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps as prescribed by ASC 606:

The Company determines revenue recognition by applying the following five steps as prescribed by ASC 606:

(i) identify the contract(s) with a customer;

3 unchanged sentences

(v) recognize revenue when (or as) the entity satisfies performance obligations.

A contract with a customer exists when (i) the Company enters into a legally enforceable contract with a customer that defines each party’s rights regarding the products or services to be transferred and identifies the payment terms related to these products or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for products or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

The Company identifies performance obligations in

Pulmonx Corporation

Notes to Consolidated Financial Statements

The Company identifies performance obligations in contracts with customers, which may include its products and implied promises to provide free products and analysis services for patient scans.

contracts with customers, which may include its products and implied promises to provide free products and analysis services for patient scans.

The transaction price is determined based on the amount expected to be entitled to in exchange for transferring the promised services or product to the customer.

24 unchanged sentences

Research and Development

Research and development expenses consist of compensation costs, stock-based compensation, engineering and research expenses, clinical trials and related expenses, regulatory expenses, manufacturing expenses incurred to build products for testing, allocated facilities costs, consulting fees and other expenses incurred to sustain the

Pulmonx Corporation

Notes to Consolidated Financial Statements

Company’s overall research and development programs.

All research and development costs are expensed as incurred.

Clinical trial costs are a significant component of the Company’s research and development expenses.

The Company has a history of contracting with third parties that perform various clinical trial activities on the Company’s behalf in the ongoing development of its product candidates.

The Company has a history of contracting with third parties that perform various clinical trial activities on the Company’s behalf in

Pulmonx Corporation

Notes to Consolidated Financial Statements

the ongoing development of its product candidates.

The financial terms of these contracts are subject to negotiations and may vary from contract to contract and may result in uneven payment flow.

3 unchanged sentences

The Company expenses the costs of advertising as incurred.

Advertising expenses were $ 6.1 million and $ 5.1 million for the years ended December 31, 2022 and 2021, respectively.

Advertising expenses were $ 4.8 million and $ 6.1 million for the years ended December 31, 2023 and December 31, 2022, respectively.

Foreign Currency Translation and Transaction Gains and Losses

5 unchanged sentences

The revenues and expenses are translated using the average exchange rates in effect during the period, and gains and losses from foreign currency translation adjustments are included as a component of accumulated other comprehensive income in the consolidated balance sheet.

Foreign currency translation adjustments are recorded in other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss and was $ 0.2 million and $ 0.1 million during the years ended December 31, 2022 and 2021, respectively.

Foreign currency transaction gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive loss and was $( 0.4 ) million and $( 0.6 ) million during the years ended December 31, 2022 and 2021, respectively.

Foreign currency translation adjustments are recorded in other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss and was $ 0.7 million and $ 0.2 million during the years ended December 31, 2023 and December 31, 2022, respectively.

Foreign currency transaction gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive loss and was $( 0.8 ) million and $( 0.4 ) million during the years ended December 31, 2023 and December 31, 2022, respectively.

Stock-Based Compensation

8 unchanged sentences

The Company accounts for forfeitures as they occur.

Pulmonx Corporation

Notes to Consolidated Financial Statements

The Company issued stock options in exchange for the receipt of goods or services from non-employees.

Costs for such equity instruments are measured at the fair value of the equity instruments issued on the measurement date as the Company believes that the fair value of the equity instrument is more reliably measured than the fair value of the services received.

Pulmonx Corporation

Notes to Consolidated Financial Statements

The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the consolidated financial statements and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to affect taxable income.

16 unchanged sentences

Comprehensive gain or loss is defined as a change in equity of a business enterprise during a period, resulting from transactions and other events and circumstances from non-owner sources.

The Company’s currency translation adjustment and unrealized gains and losses from marketable securities are the components of other comprehensive income that are excluded from the reported net loss for all periods presented.

The Company’s currency translation adjustment and unrealized gains and losses from marketable securities are the components of other comprehensive income (loss) that are excluded from the reported net loss for all periods presented.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses .

1 unchanged sentence

The new model requires an entity to estimate credit losses based on historical information, current information and reasonable and supportable forecasts, including estimates of prepayments.

In November 2019, the FASB issued ASU 2019-10, according to which, the new standard is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For all other entities, including the Company, the new standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year.

The Company adopted

Pulmonx Corporation

Notes to Consolidated Financial Statements

November 2019, the FASB issued ASU 2019-10, according to which, the new standard is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For all other entities, including the Company, the new standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year.

The standard will become effective for the Company beginning January 1, 2023.

Adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

ASU 2016-13 as of January 1, 2023 and the adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker (CODM), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss.

This ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss.

Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in the update and existing segment disclosures in Topic 280.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact that this update will have on its disclosures in the consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the disclosure requirements related to the new standard.

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

10 unchanged sentences

An impairment charge is recorded when the carrying value of the asset exceeds its fair value.

As noted above, there have been no impairment charges recorded to date.

As noted above, there have been no impairment charges recorded

Pulmonx Corporation

Notes to Consolidated Financial Statements

Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the term loan approximates the fair value.

3 unchanged sentences

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

Pulmonx Corporation

Notes to Consolidated Financial Statements

December 31, 2023

Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds

$ 25,129 $ — $ — $ 25,129

Cash equivalents 4,647 — — 4,647

Total cash equivalents 25,129 — — 25,129

Marketable securities:

Government agency bonds 5,798 29,466 — 35,264

Commercial paper — 12,681 — 12,681

Marketable securities 14,743 30,583 — 45,326

Total marketable securities 5,798 42,147 — 47,945

Total financial assets $ 30,927 $ 42,147 $ — $ 73,074

1 unchanged sentence

Level 1 Level 2 Level 3 Total

Money market funds $ 831 $ — $ — $ 831

Commercial paper — 2,000 — 2,000

Corporate bonds — 4,410 — 4,410

Cash equivalents:

Money market funds $ 4,647 $ — $ — $ 4,647

Total cash equivalents 4,647 — — 4,647

Marketable securities:

Government agency bonds 14,743 15,872 — 30,615

Commercial paper — 14,711 — 14,711

Corporate bonds — 2,914 — 2,914

Marketable securities 14,977 27,525 — 42,502

Total marketable securities 14,743 30,583 — 45,326

Total financial assets $ 19,390 $ 30,583 $ — $ 49,973

7 unchanged sentences

Commercial paper 12,667 ( 1 ) 15 12,681

14,740 ( 29 ) — 14,711

Marketable securities $ 45,637 $ ( 311 ) $ — $ 45,326

Amounts recognized on the consolidated balance sheet

Short-term marketable securities

Long-term marketable securities 5,924

Marketable securities $ 45,326

Total $ 47,861 $ ( 27 ) $ 111 $ 47,945

December 31, 2022

1 unchanged sentence

Government agency bonds $ 30,897 $ ( 282 ) $ — $ 30,615

Corporate bonds

2,915 ( 1 ) — 2,914

Commercial paper 14,740 ( 31 ) 2 14,711

Total $ 45,637 $ ( 313 ) $ 2 $ 45,326

The following table summarizes the marketable securities with unrealized losses as of December 31, 2023 and December 31, 2022, aggregated by major security type and the length of time that individual securities have been in a continuous loss position (in thousands):

December 31, 2023

Less than 12 months 12 months or greater Total

Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

Government agency bonds $ 11,888 $ ( 23 ) $ 1,745 $ ( 3 ) $ 13,633 $ ( 26 )

Commercial paper 996 ( 1 ) — — 996 ( 1 )

Total $ 12,884 $ ( 24 ) $ 1,745 $ ( 3 ) $ 14,629 $ ( 27 )

December 31, 2022

Less than 12 months 12 months or greater Total

Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

Government agency bonds $ 19,768 $ ( 139 ) $ 10,847 $ ( 143 ) $ 30,615 $ ( 282 )

Commercial paper 11,818 ( 31 ) — — 11,818 ( 31 )

Total $ 31,586 $ ( 170 ) $ 10,847 $ ( 143 ) $ 42,433 $ ( 313 )

The unrealized losses for marketable securities relate to changes in interest rates.

During the years ended December 31, 2023 and December 31, 2022, the Company did not consider any of its marketable securities to be other-than-temporarily impaired.

No allowance for credit losses was recorded as of December 31, 2023 and December 31, 2022, and no impairment losses were recognized for the years ended December 31, 2023 and December 31, 2022.

At December 31, 2023 and December 31, 2022, accrued interest receivable on marketable securities of $ 0.4 million and $ 0.1 million was included in prepaid expenses and other current assets on the consolidated balance sheets, respectively.

The Company elected to exclude accrued interest receivable from the estimation of expected credit losses on its marketable securities and reverse accrued interest receivable through interest income (expense) when

Pulmonx Corporation

Notes to Consolidated Financial Statements

amounts are determined to be uncollectible.

The Company did no t write off any accrued interest receivable during the years ended December 31, 2023 and December 31, 2022.

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

December 31, 2023

Amortized Cost Fair Value

Due within one year

$ 33,551 $ 33,555

Marketable securities $ 42,526 $ ( 29 ) $ 5 $ 42,502

Amounts recognized on the consolidated balance sheet

Short-term marketable securities

Long-term marketable securities 10,941

Marketable securities $ 42,502

As of December 31, 2022 and 2021, all of the marketable securities are classified as available for sale, in which short-term marketable securities mature within one year and long-term marketable securities mature in one to two years .

At December 31, 2022 and 2021, accrued interest on marketable securities of $ 0.1 million and $ 0.1 million was included in prepaid expenses and other current assets on the consolidated balance sheets, respectively.

Due in one year to five years

$ 14,310 $ 14,390

Total $ 47,861 $ 47,945

Balance Sheet Components

4 unchanged sentences

Money market funds

Commercial paper — 2,000

Corporate bonds — 4,410

Total cash and cash equivalents $ 83,547 $ 101,736

Pulmonx Corporation

Notes to Consolidated Financial Statements

Inventory consists of the following (in thousands):

6 unchanged sentences

Total inventory $ 19,323 $ 19,847

Pulmonx Corporation

Notes to Consolidated Financial Statements

Prepaid Expenses and Other Current Assets

10 unchanged sentences

The Company expenses all costs (internal and external) that are incurred in the planning and post-implementation operation stages.

As of December 31, 2022, the Company has capitalized approximately $ 0.5 million of implementation costs, net of amortization.

As of December 31, 2021, the Company did no t capitalize expenses in implementation costs.

As of December 31, 2023 and December 31, 2022, the Company has capitalized approximately $ 0.1 million and $ 0.5 million in implementation costs, net of amortization, respectively.

The capitalized costs are amortized on a straight-line basis over the non-cancelable contract terms, which are generally three years .

As of December 31, 2022, approximately $ 0.3 million and $ 0.2 million capitalized costs were included in prepaid expenses and other current assets, and other long-term assets, respectively.

Amortization expense, which was included in selling, general and administrative expenses, was $ 0.2 million and $ 0 for the years ended December 31, 2022 and December 31, 2021, respectively.

Pulmonx Corporation

Notes to Consolidated Financial Statements

As of December 31, 2023, the capitalized costs of $ 0.1 million were included in prepaid expenses and other current assets.

Amortization expense, which was included in selling, general and administrative expenses, was $ 0.4 million and $ 0.2 million for the years ended December 31, 2023 and December 31, 2022, respectively.

Property and Equipment, Net

8 unchanged sentences

Property and equipment, net $ 4,028 $ 4,694

Depreciation expense for the years ended December 31, 2022 and December 31, 2021 was $ 1.4 million and $ 0.7 million, respectively.

Goodwill was $ 2.3 million as of December 31, 2022 and December 31, 2021 arising from the Company’s acquisition of Emphasys Medical, Inc, in March 2009.

Depreciation expense for both the years ended December 31, 2023 and December 31, 2022 was $ 1.4 million.

Goodwill was $ 2.3 million as of December 31, 2023 and December 31, 2022.

No goodwill impairment losses have been recognized since the acquisition.

There were no acquisitions or dispositions of goodwill in 2022 and 2021.

The Company performed an annual test for goodwill impairment in the fourth quarter of the fiscal years ended December 31, 2022 and December 31, 2021 and determined that goodwill was no t impaired.

There were no acquisitions or dispositions of goodwill for the years ended December 31, 2023 or December 31, 2022.

The Company performed an annual test for goodwill impairment in the

Pulmonx Corporation

Notes to Consolidated Financial Statements

fourth quarter of the fiscal years ended December 31, 2023 and December 31, 2022 and determined that goodwill was no t impaired.

Intangible Assets

10 unchanged sentences

Total intangible assets $ 1,849 $ ( 1,695 ) $ 154

Amortization expense relating to the intangibles totaled $ 0.1 million during each of the years ended on December 31, 2022 and 2021.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Future amortization expense is as follows (in thousands):

Year Ending December 31,

Amortization expense relating to the intangibles totaled $ 0.1 million during each of the years ended on December 31, 2023 and December 31, 2022.

Future amortization expense is as follows as of December 31, 2023 (in thousands):

Fiscal Year Ending December 31, Amortization

Total amortization expense

10 unchanged sentences

Total accrued liabilities $ 16,234 $ 13,276

Pulmonx Corporation

Notes to Consolidated Financial Statements

Long Term Debt

9 unchanged sentences

Per the amended terms, 36 equal payments of principal plus accrued interest would be due beginning March 31, 2022.

In connection with the Amended and Restated CIBC Agreement, the Company paid fees to CIBC of less than

Pulmonx Corporation

Notes to Consolidated Financial Statements

$ 0.1 million which were recorded as a discount on the CIBC Loan and are being accreted over the life of the term loan using the effective interest method.

In connection with the Amended and Restated CIBC Agreement, the Company paid fees to CIBC of less than $ 0.1 million which were recorded as a discount on the CIBC Loan and are being accreted over the life of the term loan using the effective interest method.

The amendment was accounted for as a debt modification and no gain or loss was recognized.

9 unchanged sentences

The amendment was accounted for as a debt modification and no gain or loss was recognized.

The financial covenants in the Amended and Restated CIBC Agreement require that, when the cash and cash equivalents of the Company is less than $ 50.0 million if no Amended Tranche B loans have been made and less than $ 100.0 million if Amended Tranche B loans have been made, the Company have revenue for the trailing three-month period ending on the last day of each fiscal quarter of not less than 80.0 % of the revenue for the trailing three-month period, as set forth in the annual projections delivered to the CIBC.

Further, the Company is required to maintain unrestricted cash in an aggregate amount equal to or greater than the Adjusted EBITDA loss as defined in the Amended and Restated CIBC Agreement for the four-month period ending on any date of determination if no Amended Tranche B loans have been made and an amount equal to the greater of $ 20.0 million and the Adjusted EBITDA loss as defined in the Amended and Restated CIBC Agreement for the six-month period ending on any date of determination if Amended Tranche B loans have been made.

In February 2023, the Company drew $ 20.0 million of the Amended Tranche B of the CIBC Loan.

The Amended Tranche B bears interest at a floating rate equal to 1.0 % above the Wall Street Journal Prime Rate and has the same repayment terms as the Tranche A.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Upon draw of the Amended Tranche B, the financial covenants in the Amended and Restated CIBC Agreement require that, when the cash and cash equivalents of the Company as defined in the Amended and Restated CIBC Agreement is less than $ 100.0 million, the Company have revenue for the trailing three-month period ending on the last day of each fiscal quarter of not less than 80.0 % of the revenue for the trailing three-month period, as set forth in the annual projections delivered to the CIBC.

Further, the Company is required to maintain unrestricted cash in an aggregate amount equal to the greater of $ 20.0 million and the Adjusted EBITDA loss as defined in the Amended and Restated CIBC Agreement for the six-month period ending on any date of determination.

As of December 31, 2023, the Company was in compliance with all covenants contained in Amended and Restated CIBC Agreement.

1 unchanged sentence

The CIBC Loan is collateralized by substantially all of the Company’s assets, including cash and cash equivalents, accounts receivable, intellectual property and equipment.

The Company may prepay the CIBC Loans without penalty.

If the Company borrows any of the $ 20.0 million Amended Tranche B made available under the Third Amendment, the Company may prepay the loans, subject to certain conditions, including a prepayment fee equal to 2.0 % of the principal amount repaid during the first year after the effective date of the Third Amendment or 1.0 % of the principal amount prepaid during the second year after the effective date of the Third Amendment.

As of December 31, 2022, the CIBC Loan had an annual effective interest rate of 9.1 % per year.

Pulmonx Corporation

Notes to Consolidated Financial Statements

The Company may prepay the borrowings under the Amended and Restated CIBC Agreement, subject to certain conditions, including a prepayment fee equal to 2.0 % of the principal amount repaid during the first year after the effective date of the Third Amendment or 1.0 % of the principal amount prepaid during the second year after the effective date of the Third Amendment.

As of December 31, 2023 and December 31, 2022, the CIBC Loan had an annual effective interest rate of 10.1 % and 9.1 % per year.

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

December 31, December 31,

$ 37,000 $ 17,000

6 unchanged sentences

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

During the year ended December 31, 2022 and December 31, 2021, the Company recorded interest expense related to debt discount and debt issuance costs of CIBC Loan of $ 0.1 million and $ 0.1 million, respectively.

Interest expense on the CIBC Loan amounted to $ 1.1 million and $ 0.8 million during the year ended December 31, 2022 and December 31, 2021, respectively.

During the years ended December 31, 2023 and December 31, 2022, the Company recorded interest expense related to debt discount and debt issuance costs of CIBC Loan of less than $ 0.1 million and $ 0.1 million, respectively.

Interest expense on the CIBC Loan amounted to $ 3.2 million and $ 1.1 million during the years ended December 31, 2023 and December 31, 2022, respectively.

Credit Agreement

In April 2020, Pulmonx International Sàrl, a wholly owned subsidiary of the Company, entered into a COVID-19 Credit Agreement with UBS Switzerland AG to receive up to 0.5 million Swiss Francs ($ 0.5 million U.S.

dollar equivalent) under Swiss Federal Government program to mitigate the economic impact of the spread of the coronavirus.

In May 2020, Pulmonx International Sàrl received 0.5 million Swiss Francs ($ 0.5 million U.S.

dollar equivalent) under the COVID-19 Credit Agreement.

The COVID-19 Credit Agreement bears no interest and will be repaid in twelve equal installments, paid semi-annually, which began in March of 2022.

As of December 31, 2022, Pulmonx International Sàrl repaid $ 0.1 million to the lender.

In May 2020, Pulmonx International Sàrl, a wholly owned subsidiary of the Company, received 0.5 million Swiss Francs ($ 0.5 million U.S.

dollar equivalent) from a COVID-19 Credit Agreement under a Swiss Federal Government program designed to mitigate the economic impact of the spread of the coronavirus.

The COVID-19 Credit Agreement initially bore no interest through March 31, 2023.

Beginning April 1, 2023, the COVID-19 Credit Agreement bears interest at a rate of 1.5 % per year, payable at the end of each calendar quarter.

The loan principal is being repaid in twelve equal installments, paid semi-annually, which began in March of 2022.

Interest expense was immaterial during the year ended December 31, 2023.

Pulmonx International Sàrl repaid $ 0.1 million and $ 0.1 million to the lender during the years ended December 31, 2023 and December 31, 2022, respectively.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Contractual Maturities of Financing Obligations

As of December 31, 2023, the aggregate future payments under the CIBC Loan and Credit Agreement (including interest payments) are as follows (in thousands):

Fiscal Year Ending December 31, Amount

Total $ 45,749

2 unchanged sentences

Term loan and credit agreement

Pulmonx Corporation

Notes to Consolidated Financial Statements

Revenue Recognition

The Company’s contract liabilities consist of deferred revenue for remaining performance obligations by the Company to the customer after delivery, which was $ 0.1 million as of December 31, 2022, which is expected to be recognized as revenue in 2023.

The Company’s contract liabilities consist of deferred revenue for remaining performance obligations by the Company to the customer after delivery, which was $ 0.1 million as of December 31, 2023, which is expected to be recognized as revenue in fiscal year 2024.

The deferred revenue as of December 31, 2022 was $ 0.1 million, which was recognized as revenue during the year ended December 31, 2023.

The deferred revenue as of December 31, 2021 was $ 0.2 million, which was recognized as revenue during the year ended December 31, 2022.

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

7 unchanged sentences

Per the lease terms, in the event the option to extend is not exercised, the lease remains in force and can be terminated with 12-month s’ notice.

In April 2020, the Company executed a sublease for another office facility in Redwood City, California for a three-year term commencing on June 1, 2020.

The lease agreement provides for early termination if the Company or Sublandlord elects to terminate the lease by providing the other party at least 180 days prior written notice.

In April 2020, the Company executed a sublease for another office facility in Redwood City, California for a three-year term commencing on June 1, 2020 (the “Sublease Agreement”).

The Sublease Agreement provides for early termination if the Company or Sublandlord elects to terminate the lease by providing the other party at least 180 days prior written notice.

The early termination may only occur on or after the expiration of the 18 th full calendar month of the sublease term.

1 unchanged sentence

The Company is responsible for its share of real estate taxes, common area maintenance and management fees.

In September 2020, the Company amended the sublease agreement entered into in April 2020, to include additional facility space in Redwood City, California for a four-year term.

The amendment was accounted as a separate sublease agreement.

The sublease agreement contained a rent-free period through February 14, 2021, after which rent is approximately $ 0.1 million per month and is subject to an annual increase of 3.5 %.

In September 2020, the Company amended the Sublease Agreement to include additional facility space in Redwood City, California for a four-year term (the “First Amendment to Sublease Agreement”).

The First Amendment to Sublease Agreement was accounted as a separate sublease agreement.

The First Amendment to Sublease Agreement contained a rent-free period through February 14, 2021, after which rent is approximately $ 0.1 million per month

Pulmonx Corporation

Notes to Consolidated Financial Statements

and is subject to an annual increase of 3.5 %.

The Company is responsible for its share of real estate taxes, common area maintenance and management fees.

The Company is eligible to receive a tenant improvement allowance of $ 0.7 million to fund facility enhancements.

The sublease agreement can be extended for an additional twelve-month period, at the Company’s option.

The First Amendment to Sublease Agreement can be extended for an additional twelve-month period, at the Company’s option.

For accounting purposes, the lease term is 4 years as it is not reasonably certain that the Company will exercise the renewal option.

The amendment also changed the lease term entered into in April 2020, which was extended until May 31, 2024, but left the early termination clause unchanged.

The First Amendment to Sublease Agreement also changed the lease term entered into in April 2020, which was extended until May 31, 2024, but left the early termination clause unchanged.

In September 2021, the Company became reasonably certain that the early termination clause would not be exercised as capital expenditures on the facility build-out created sufficient disincentive to terminate the lease early.

The lease term was reevaluated and extended from November 30, 2021 to May 31, 2024.

The Company has leases on ten vehicles with an average lease term of 2.9 years.

Pulmonx Corporation

Notes to Consolidated Financial Statements

In April 2023, the Company entered into a Second Amendment to Sublease Agreement (the “Second Amendment to Sublease Agreement”) to remove the early termination clause and extend the lease term by four months to expire contemporaneously with the expiration date as defined in Sublease Agreement.

The amendment was accounted for as a modification that resulted in additional right of use assets in exchange for lease liabilities of $ 0.2 million.

As of December 31, 2023, the Company has leases on 14 vehicles with an average lease term of 3.0 years.

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

7 unchanged sentences

The following table summarizes a maturity analysis of the Company’s lease liabilities showing the aggregate lease payments as of December 31, 2023 (in thousands):

Fiscal Year Ending December 31, Amount

Total minimum lease payments

7 unchanged sentences

Weighted average remaining lease term (years) 1.35 2.08

Weighted average discount rate (percent) 6.0 % 6.0 %

Weighted average discount rate 6.7 % 6.0 %

Pulmonx Corporation

Notes to Consolidated Financial Statements

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

3 unchanged sentences

Right-of-use assets obtained in exchange for lease liabilities

$ 229 $ 1,460

Service Agreement

In April 2022, the Company entered into an agreement with a service provider which requires total minimum purchases of $ 0.6 million, $ 0.4 million, and $ 0.4 million over the next three years.

In April 2022, the Company entered into an agreement with a service provider, which requires total minimum purchases of $ 0.6 million, $ 0.4 million, and $ 0.4 million over a three-year period.

From inception of the agreement through December 31, 2023, the Company recorded $ 0.9 million of expense for services related to this agreement in cost of goods sold.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Contingencies

9 unchanged sentences

Depending on the outcome of the Investigation, there could be a material impact on the Company’s business, results of operations and financial condition.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Income before the provision for income taxes consists of the following (in thousands):

9 unchanged sentences

Federal $ 7 $ 32

State 14 ( 1 )

Foreign 9 ( 5 )

Total deferred expense 26 55

Total income tax expense $ 571 $ 353

Pulmonx Corporation

Notes to Consolidated Financial Statements

The reconciliation between the federal statutory rate and the Company’s effective tax rate is summarized below:

8 unchanged sentences

Effective tax rate ( 0.9 ) % ( 0.6 ) %

Pulmonx Corporation

Notes to Consolidated Financial Statements

Deferred income taxes arise from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes, as well as operating losses and tax credit carryforwards.

6 unchanged sentences

Intangible assets 4,049 4,394

Right of use liability 920 1,443

Capitalized research costs 5,749 2,838

4 unchanged sentences

Deferred tax liabilities:

Depreciation — ( 43 )

Right of use asset $ ( 739 ) $ ( 1,147 )

Goodwill ( 545 ) ( 502 )

5 unchanged sentences

net deferred tax assets have been fully offset by a valuation allowance of $ 79.4 million as of December 31, 2023.

The valuation allowance increased by $ 11.9 million and $ 14.6 million for the years ended December 31, 2022 and 2021, respectively.

The valuation allowance increased by $ 10.9 million and $ 11.9 million for the years ended December 31, 2023 and December 31, 2022, respectively.

As of December 31, 2023, the Company had a total net operating loss carryforwards for federal income tax purposes of approximately $ 245.8 million.

If not utilized, these net federal operating loss carryforwards will begin to expire at the end of the year.

The Company also had a state net operating loss carryforward of approximately $ 406.4 million which will expire beginning in the year 2023.

Pulmonx Corporation

Notes to Consolidated Financial Statements

If not utilized, these net federal operating loss carryforwards will begin to expire in 2024.

The Company also had a state net operating loss carryforward of approximately $ 155.4 million which will begin to expire in 2024.

For tax years in January 1, 2018 onwards, any federal net operating losses generated will be allowable for carry forward indefinitely, as opposed to the original expiration of 20 years.

1 unchanged sentence

The Company also had federal and state research and development (“R&D”) tax credit carryforwards of approximately $ 3.6 million and $ 5.1 million, respectively.

The federal tax R&D credit carryforwards will expire beginning in 2030 while the state tax credit carryforwards have no expiration date.

The federal tax R&D credit carryforwards will expire beginning in the year 2030 while the state tax credit carryforwards have no expiration date.

Utilization of the net operating loss carryforwards and R&D tax credit carryforwards may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code, as defined in Section 382, and other similar state provisions.

The annual limitation may result in the expiration of net operating losses and credits before utilization.

During the year ended December 31, 2018, the Company completed a section 382 study for which the Company wrote off deferred tax assets for NOLs and credits of $ 3.1 million and $ 1.2 million, respectively.

During the year ended December 31, 2018, the Company completed a section 382 study for which the Company wrote off deferred tax assets for net operating losses and credits of $ 3.1 million and $ 1.2

Pulmonx Corporation

Notes to Consolidated Financial Statements

million, respectively.

Since the Company had a full valuation allowance on these assets, there was no material impact to the tax provision.

The Company completed another section 382 study for the year ended December 31, 2020 for which the Company had a change in ownership.

No additional NOLs or credits will expire unused due to the 2020 annual limitation.

Based on management’s analysis for the year ended December 31, 2022 no further material NOLs or credits will expire unused due to Section 382 limitations.

No additional net operating losses or credits will expire unused due to the 2020 annual limitation.

The Company completed another section 382 study for the year ended December 31, 2022 for which the Company had no change in ownership.

Additionally, based on the Company’s analysis, no further material net operating losses or credits have expired unused due to the section 382 limitations as of December 31, 2023.

Annually, the Company determines whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities in considering whether any tax benefit can be recorded in the consolidated financial statements.

2 unchanged sentences

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits (in thousands):

Balance at January 1, 2021 $ 8,248

Balance at December 31, 2021 $ 8,489

Additions for tax positions related to prior year 106

Decreases for tax positions related to prior year ( 153 )

Additions for tax positions related to current year 200

6 unchanged sentences

The Company’s major tax jurisdictions are the United States and California, and Switzerland and Neuchâtel.

All of the Company’s tax years will remain open for examination by the federal and state tax authorities for three and four years, respectively, from the date of utilization of the net operating loss or R&D Credits.

The Company does not have any tax audits or other issues pending.

As currently enacted, beginning in 2022, the Tax Cuts and Jobs Act (the "Tax Act") requires taxpayers to capitalize research and development expenses with amortization periods over five and fifteen years, which is expected to decrease the amount of the Company's generated NOL during the year.

Pulmonx Corporation

Notes to Consolidated Financial Statements

As currently enacted, the Tax Cuts and Jobs Act (the "Tax Act") requires taxpayers to capitalize research and development expenses with amortization periods over five and fifteen years, which is expected to decrease the amount of the Company's generated net operating losses during the year.

Stockholders’ Equity

3 unchanged sentences

The holder of each share of common stock is entitled to one vote.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Shares Reserved for Future Issuance

16 unchanged sentences

Options to purchase the Company’s common stock may be granted at a price not less than 100 % of the fair market value in the case of ISO or NSO, except for an employee or non-employee with options who owns more than 10% of the voting power of all classes of stock of the Company in which case the exercise price shall be no less than 110 % of the fair market value per share on the grant date.

Fair market value is determined by the Board of Directors.

Options vest as determined by the Board of Directors ranging from immediately upon grant to a rate of 25 % per annum over four years from the grant date.

Options expire as determined by the Board of Directors but not more than ten years after the date of grant.

Pulmonx Corporation

Notes to Consolidated Financial Statements

Options vest ranging from immediately upon grant to a rate of 25 % per annum over four years from the grant date.

Options expire but not more than ten years after the date of grant.

Activity under the Stock Plans is set forth below:

16 unchanged sentences

Balance, December 31, 2023 3,142,981 $ 16.40

Pulmonx Corporation

Notes to Consolidated Financial Statements

The aggregate intrinsic value of options exercised during the years ended December 31, 2023 and December 31, 2022 was $ 1.3 million and $ 4.6 million, respectively.

7 unchanged sentences

Options vested and expected to vest 3,142,981 $ 16.40 7.47

Total intrinsic value of options vested as of December 31, 2022 and December 31, 2021 was $ 4.1 million and $ 18.9 million, respectively.

The aggregate intrinsic value of options exercisable as of December 31, 2023 and December 31, 2022 was $ 8.6 million and $ 4.1 million, respectively.

Early Exercise of Stock Options

3 unchanged sentences

The proceeds initially are recorded in other liabilities from the early exercise of stock options and are reclassified to additional paid-in capital as the Company’s repurchase right lapses.

During the years ended December 31, 2022 and 2021, the Company repurchased 14,459 and 12,945 shares of common stock for less than $ 0.1 million and less than $ 0.1 million, respectively.

As of December 31, 2022 and December 31, 2021, 77,782 and 223,195 shares were subject to repurchase, with an aggregate exercise price of $ 0.1 million and $ 0.4 million, respectively, and were recorded in accrued liabilities on the consolidated balance sheets.

Pulmonx Corporation

Notes to Consolidated Financial Statements

During the years ended December 31, 2023 and December 31, 2022, the Company repurchased 106 and 14,459 shares of common stock for less than $ 0.1 million and less than $ 0.1 million, respectively.

As of December 31, 2023 and December 31, 2022, 109 and 77,782 shares were subject to repurchase, with an aggregate exercise price of less than $ 0.1 million and $ 0.1 million, respectively, and were recorded in accrued liabilities on the consolidated balance sheets.

Restricted Stock Units

1 unchanged sentence

Number of Shares Underlying Outstanding Restricted Stock Weighted Average Grant Date Fair Value

Unvested, January 1, 2021 — $ —

Unvested, December 31, 2021 442,428 $ 42.36

Granted 937,400 23.63

6 unchanged sentences

Unvested, December 31, 2023 2,244,903 $ 15.74

The aggregate intrinsic value of restricted stock units outstanding as of December 31, 2022 and December 31, 2021 was $ 8.4 million and $ 14.2 million, respectively.

The fair value as of the respective vesting dates of restricted stock units that vested during the years ended December 31, 2023 and December 31, 2022 was $ 7.5 million and $ 3.9 million, respectively.

The aggregate intrinsic

Pulmonx Corporation

Notes to Consolidated Financial Statements

value of restricted stock units outstanding as of December 31, 2023 and December 31, 2022 was $ 28.6 million and $ 8.4 million, respectively.

Stock-Based Compensation for Employees and Non-Employees

The weighted average grant-date fair value of the stock options granted during the years ended December 31, 2022, December 31, 2021 was $ 10.74 and $ 18.81 per share, respectively.

The weighted average grant-date fair value of the stock options granted during the years ended December 31, 2023 and December 31, 2022 was $ 7.77 and $ 10.74 per share, respectively.

The Company uses the Black-Scholes Merton option-pricing model to determine the fair value of stock options.

The determination of the fair value of stock-based payment awards on the date of grant is affected by the stock price as well as assumptions regarding a number of complex and subjective variables.

These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and expected dividends.

These variables include expected stock price volatility over the term of the awards, risk-free interest rates and expected dividends.

The estimated grant date fair values of employee stock options were calculated using the following assumptions:

11 unchanged sentences

For awards with multiple vesting-tranches, the periods from grant until the mid-point for each of the tranches are averaged to provide an overall expected term.

Pulmonx Corporation

Notes to Consolidated Financial Statements

The expected stock price volatility assumptions for the Company’s stock options for the years ended December 31, 2022 and December 31, 2021 was determined by examining the historical volatilities for industry peers, referred to as “guideline” companies, as the Company had limited trading history for the Company’s common stock.

The expected stock price volatility assumptions for the Company’s stock options for the years ended December 31, 2023 and December 31, 2022 were determined using the Company’s historical volatility and the historical volatilities of industry peers, referred to as “guideline” companies, as the Company had limited trading history for the Company’s common stock.

In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size.

The expected stock price volatility assumptions for the purchase rights under the employee share purchase plan for the years ended December 31, 2023 and December 31, 2022 were determined using the historical volatility of the Company’s common stock.

Risk-Free Rate

4 unchanged sentences

Fair Value of Common Stock

Pulmonx Corporation

Notes to Consolidated Financial Statements

The fair value of the Company’s common stock is determined based on its closing market price on the date of grant.

16 unchanged sentences

Risk-free interest rate 5.0 % - 5.5 %

0.7 % - 3.1 %

Dividend yield — —

Total Stock-Based Compensation

Pulmonx Corporation

Notes to Consolidated Financial Statements

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

4 unchanged sentences

Total $ 22,101 $ 16,445

The above stock-based compensation expense related to the following equity-based awards:

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

Years Ended December 31,

Stock options and restricted stock units $ 21,675 $ 15,807

ESPP 638 2,571

Total $ 22,101 $ 16,445

Pulmonx Corporation

Notes to Consolidated Financial Statements

Stock-based compensation of $ 1.6 million and $ 1.2 million was capitalized into inventory for the years ended December 31, 2023 and 2022, respectively.

1 unchanged sentence

As of December 31, 2023, there was $ 43.7 million of unrecognized compensation costs related to non-vested common stock options and restricted stock units, expected to be recognized over a weighted-average period of 2.5 years.

The total grant date fair value of shares and restricted stock units vested during the years ended December 31, 2022 and December 31, 2021 was $ 15.5 million and $ 8.3 million, respectively.

The total grant date fair value of shares vested during the years ended December 31, 2023 and December 31, 2022 was $ 21.7 million and $ 15.5 million, respectively.

As of December 31, 2023, the Company had unrecognized employee stock-based compensation relating to ESPP awards of approximately $ 0.1 million, which is expected to be recognized over a weighted-average period of 0.1 years.

7 unchanged sentences

Net loss per share attributable to common stockholders, basic and diluted $ ( 1.60 ) $ ( 1.59 )

Pulmonx Corporation

Notes to Consolidated Financial Statements

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

9 unchanged sentences

The Company has one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level.

Accordingly, the Company has determined that it has a single reportable and operating segment structure.

Accordingly, the Company has

Pulmonx Corporation

Notes to Consolidated Financial Statements

determined that it has a single reportable and operating segment structure.

The Company’s Chief Executive Officer evaluates performance based primarily on revenue in the geographic locations in which the Company operates.

1 unchanged sentence

The following table sets forth our revenue by geographic area (in thousands):

Year Ended December 31,

Years Ended December 31,

United States $ 45,917 $ 32,487

4 unchanged sentences

Revenue from Germany represented 8 % and 11 % of total revenue for the years ended December 31, 2023 and 2022, respectively.

Revenue from France represented 7 % and 9 % of total revenue for the years ended December 31, 2022 and 2021, respectively.

Long-lived assets by geographic area are based on physical location of those assets.

4 unchanged sentences

Total $ 4,028 $ 4,694

Pulmonx Corporation

Notes to Consolidated Financial Statements

Employee Benefit Plan

2 unchanged sentences

There have been no contributions made to the Savings Plan by the Company since inception.

Subsequent Events

In February 2023, the Company drew $ 20.0 million of the Amended Tranche B of the CIBC Loan.

The Amended Tranche B bears interest at a floating rate equal to 1.0 % above the Wall Street Journal Prime Rate and has the same repayment terms as Tranche A.

Upon draw of the Amended Tranche B the financial covenants in the CIBC Agreement require that, when the cash and cash equivalents of the Company is less than $ 100.0 million, the Company have revenue for the trailing three-month period ending on the last day of each fiscal quarter of not less than 80.0 % of the revenue for the trailing three-month period, as set forth in the annual projections delivered to CIBC.

Further, the Company is required to maintain unrestricted cash in an aggregate amount equal to the greater of $ 20.0 million and the Adjusted EBITDA loss as defined in the CIBC Agreement for the six-month period ending on any date of determination.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data