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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from        to
Commission File Number: 001-39562
PULMONX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
77-0424412
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
700 Chesapeake Drive
Redwood City, California 94063
1-650-364-0400
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareLUNGThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No
As of July 29, 2022 there were 37,268,450 shares of the Registrant’s Common Stock, par value $0.001 per share, outstanding.


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TABLE OF CONTENTS
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2

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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial condition, business strategy, plans, and objectives of management for future operations and statements that are necessarily dependent upon future events are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “target,” “should,” “will,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties, and assumptions, including risks described in the section entitled “Risk Factors.” These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.
You should not rely on these forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or to changes in our expectations, whether as a result of any new information, future events, changed circumstances or otherwise. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our ability to design, develop, manufacture and market innovative products to treat patients with challenging medical conditions, particularly those with severe chronic obstructive pulmonary disease (“COPD”) and emphysema;
our expectations regarding the impact of the COVID-19 pandemic on our business;
our expected future growth, including growth in international sales;
our expected future growth of our sales and marketing organization;
the size and growth potential of the markets for our products, and our ability to serve those markets;
the rate and degree of market acceptance of our products;
coverage and reimbursement for procedures performed using our products;
the performance of third parties in connection with the development of our products, including third-party suppliers;
regulatory developments in the United States and foreign countries;
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our ability to obtain and maintain regulatory approval or clearance of our products on expected timelines;
our plans to research, develop and commercialize our products and any other approved or cleared product;
our ability to retain and hire our senior management and other highly qualified personnel;
the development, regulatory approval, efficacy and commercialization of competing products and technologies in our industry;
our ability to develop and maintain our corporate infrastructure, including an effective system of internal controls and the remediation of any material weaknesses thereunder;
our financial performance and capital requirements; and
our expectations regarding our ability to obtain and maintain intellectual property protection for our products, as well as our ability to operate our business without infringing the intellectual property rights of others.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
All brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Pulmonx” the “Company,” “we,” “us,” and “our” refer to Pulmonx Corporation.
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Part I. Financial Information
Item 1. Financial Statements
Pulmonx Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
June 30, 2022December 31, 2021
Assets
Current assets
Cash and cash equivalents$121,947 $148,480 
Restricted cash231 231 
Short-term marketable securities40,139 31,561 
Accounts receivable, net7,521 6,562 
Inventory19,212 16,285 
Prepaid expenses and other current assets3,731 4,883 
Total current assets192,781 208,002 
Long-term marketable securities4,684 10,941 
Property and equipment, net4,932 4,814 
Goodwill2,333 2,333 
Intangible assets, net216 277 
Right of use assets6,987 8,075 
Other long-term assets796 731 
Total assets$212,729 $235,173 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$2,599 $1,582 
Accrued liabilities11,734 13,366 
Income taxes payable 147 
Deferred revenue131 163 
Short-term debt2,921 91 
Current lease liabilities3,061 2,201 
Total current liabilities20,446 17,550 
Deferred tax liability47 37 
Long-term lease liabilities5,415 6,844 
Long-term debt14,460 17,324 
Other long-term liabilities179 179 
Total liabilities40,547 41,934 
Commitments and contingencies (Note 8)
Stockholders’ equity
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Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and December 31, 2021
  
Common stock, $0.001 par value, 200,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 37,266,030 shares issued and outstanding as of June 30, 2022 and 36,931,762 shares issued and outstanding as of December 31, 2021
37 37 
Additional paid-in capital492,651 482,885 
Accumulated other comprehensive income1,357 1,712 
Accumulated deficit(321,863)(291,395)
Total stockholders’ equity172,182 193,239 
Total liabilities and stockholders’ equity$212,729 $235,173 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
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Pulmonx Corporation
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue$13,950 $12,203 $24,735 $21,447 
Cost of goods sold3,532 3,174 6,206 5,807 
Gross profit10,418 9,029 18,529 15,640 
Operating expenses
Research and development3,594 3,506 7,128 6,540 
Selling, general and administrative21,235 18,205 41,480 34,276 
Total operating expenses24,829 21,711 48,608 40,816 
Loss from operations(14,411)(12,682)(30,079)(25,176)
Interest income199 102 304 207 
Interest expense(223)(206)(421)(423)
Other income (expense), net(165)(96)(165)65 
Net loss before tax(14,600)(12,882)(30,361)(25,327)
Income tax expense40 80 107 147 
Net loss(14,640)(12,962)(30,468)(25,474)
Other comprehensive income
Currency translation adjustment6 66 (18)(206)
Change in unrealized gain (loss) on marketable securities(92)3 (337) 
Total other comprehensive income (loss)(86)69 (355)(206)
Comprehensive loss$(14,726)$(12,893)$(30,823)$(25,680)
Net loss per share attributable to common stockholders, basic and diluted$(0.40)$(0.36)$(0.83)$(0.71)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
37,003,443 36,042,614 36,904,952 35,708,548 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
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Pulmonx Corporation
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(unaudited)

Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balances at January 1, 202236,931,762 $37 $482,885 $1,712 $(291,395)$193,239 
Issuance of common stock upon vesting of restricted stock units21,392 — — — — — 
Issuance of common stock upon exercise of stock options99,265 — 221 — — 221 
Issuance of shares pursuant to Employee Stock Purchase Plan46,002 — 1,108 — — 1,108 
Change in shares subject to repurchase— — 59 — — 59 
Stock-based compensation expense— — 3,615 — — 3,615 
Currency translation adjustment— — — (24)— (24)
Change in unrealized losses on marketable securities— — — (245)— (245)
Net loss— — — — (15,828)(15,828)
Balances at March 31, 202237,098,421 $37 $487,888 $1,443 $(307,223)$182,145 
Issuance of common stock upon vesting of restricted stock units93,988 — — — — — 
Issuance of common stock upon exercise of stock options73,621 — 151 — — 151 
Change in shares subject to repurchase— — 58 — — 58 
Stock-based compensation expense— — 4,554 — — 4,554 
Currency translation adjustment— — — 6 — 6 
Change in unrealized losses on marketable securities— — — (92)— (92)
Net loss— — — — (14,640)(14,640)
Balances at June 30, 202237,266,030 $37 $492,651 $1,357 $(321,863)$172,182 

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Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
Deficit
SharesAmount
Balances at January 1, 202135,693,753 $36 $467,147 $1,685 $(242,734)$226,134 
Issuance of common stock upon exercise of stock options122,856 — 273 — — 273 
Repurchase of early exercised common stock options(12,945)— — — — — 
Change in shares subject to repurchase— — 66 — — 66 
Stock-based compensation expense— — 2,462 — — 2,462 
Currency translation adjustment— — — (272)— (272)
Change in unrealized losses on marketable securities— — — (3)— (3)
Net loss— — — — (12,512)(12,512)
Balances at March 31, 202135,803,664 $36 $469,948 $1,410 $(255,246)$216,148 
Issuance of common stock upon exercise of stock options653,609 — 1,133 — — 1,133 
Issuance of shares pursuant to Employee Stock Purchase Plan123,344 — 1,992 — — 1,992 
Change in shares subject to repurchase— — 12 — — 12 
Stock-based compensation expense— — 2,476 — — 2,476 
Currency translation adjustment— — — 66 — 66 
Change in unrealized (losses) gains on marketable securities— — — 3 — 3 
Net loss— — — — (12,962)(12,962)
Balances at June 30, 202136,580,617 $36 $475,561 $1,479 $(268,208)$208,868 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
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Pulmonx Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended June 30,
20222021
Cash flows from operating activities
Net loss$(30,468)$(25,474)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense7,896 4,580 
Loss on disposal of fixed assets1  
Allowance for doubtful accounts1 (1)
Inventory write-downs111 665 
Depreciation and amortization expense744 287 
Amortization of debt discount and debt issuance costs32 64 
Amortization of premiums and discounts on short-term marketable securities19 16 
Non-cash lease expense1,226 1,149 
Net changes in operating assets and liabilities:
Accounts receivable(1,073)(2,732)
Inventory(3,030)(3,125)
Prepaid expenses and other current assets1,065 216 
Other assets6 (29)
Accounts payable1,062 293 
Accrued liabilities(1,296)2,926 
Income taxes payable(150)(87)
Lease liabilities(707)(1,137)
Deferred tax liability 11 
Deferred revenue(29)16 
Net cash used in operating activities(24,590)(22,362)
Cash flows from investing activities
Purchases of investments(21,959)(15,314)
Maturities of short-term marketable securities19,280 2,500 
Purchases of property and equipment(863)(903)
Net cash used in investing activities(3,542)(13,717)
Cash flows from financing activities
Repayment of Credit Agreement(44) 
Debt issuance cost (41)
Proceeds from exercise of common stock options382 1,381 
Proceeds from issuance of common stock under the employee stock purchase plan1,108 1,992 
Payments for repurchase of early exercised common stock options (26)
Net cash provided by financing activities1,446 3,306 
Effect of exchange rate changes on cash and cash equivalents153 (85)
Net decrease in cash and cash equivalents(26,533)(32,858)
Cash, cash equivalents and restricted cash, at beginning of the period148,711 231,792 
Cash, cash equivalents and restricted cash, at end of the period$122,178 $198,934 
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets:
Cash and cash equivalents$121,947 $198,703 
Restricted cash231 231 
Cash, cash equivalents and restricted cash in consolidated balance sheets$122,178 $198,934 
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Supplemental non-cash items:
Lapse in repurchase rights of common stock$117 $78 
Purchases of property and equipment in accounts payable$486 $608 
Amount receivable from exercise of common stock options$1 $25 
Operating lease right of use assets obtained in exchange for new lease liabilities$138 $ 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$228 $226 
Cash paid for interest$375 $360 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

1.    Formation and Business of the Company
The Company
Pulmonx Corporation (the “Company”) was incorporated in the state of California in December 1995 as Pulmonx and reincorporated in the state of Delaware in December 2013. The Company is a commercial-stage medical technology company that provides a minimally invasive treatment for patients with severe emphysema, a form of chronic obstructive pulmonary disease (“COPD”). The Company’s solution, which is comprised of the Zephyr Endobronchial Valve (“Zephyr Valve”), the Chartis Pulmonary Assessment System (“Chartis System”) and the StratX Lung Analysis Platform (“StratX Platform”), is designed to treat a broad pool of patients for whom medical management has reached its limits and either do not want or are ineligible for surgical approaches. The Company has subsidiaries in Germany, Switzerland, Australia, the United Kingdom, Italy, France, Hong Kong, and Japan.
Liquidity and Going Concern
The Company has incurred operating losses and negative cash flows from operations to date and has an accumulated deficit of $321.9 million as of June 30, 2022. During the six months ended June 30, 2022 and June 30, 2021, the Company used $24.6 million and $22.4 million of cash in its operating activities, respectively. As of June 30, 2022, the Company had cash, cash equivalents and marketable securities of $166.8 million. Historically, the Company’s activities have been financed through the sale of equity securities, debt financing arrangements and sales of our products.
The Company’s condensed consolidated financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months. Management believes that the Company’s existing cash, cash equivalents and marketable securities will allow the Company to continue its planned operations for at least the next 12 months from the date of the issuance of these unaudited interim condensed consolidated financial statements.
Impact of the COVID-19 Pandemic
There continues to be widespread significant impact from the COVID-19 pandemic, which has delayed clinical trials and FDA operations and adversely impacted the number of procedures performed using our products. In the markets in which we operate, elective, specialty and other procedures and appointments have been, and continue to be, suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of COVID-19 patients. As a result, the COVID-19 pandemic and the measures taken by many countries in response have materially adversely affected, and could in the future materially adversely affect, our business, financial condition and results of operations, as well as the price of our common stock, from a decrease and delay of procedures involving our products.
While the Company saw some level of recovery in procedure volumes in our U.S. and larger international markets in the second quarter of 2022, the smaller international markets were hampered by a slower recovery, including continued lockdowns in China. The Company may continue to see regional variations in procedure volumes in the U.S. and international markets from the COVID-19 pandemic and its variants.
The Company’s unaudited interim condensed consolidated financial statements reflect judgments and estimates that could change in the future as a result of the COVID-19 pandemic. The COVID-19 pandemic has adversely impacted the Company’s business, financial condition and results of operations by decreasing and delaying procedures performed using its products. While many regions begin to stabilize with improvements in procedure volumes, there continues to be variability and uncertainty as variants of the virus emerge. The Company can make no assurance regarding any future level of demand for the Company’s products, and COVID-19 may adversely impact the results of operations and financial condition.
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

2.    Summary of Significant Accounting Policies
Basis of Presentation
The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The condensed consolidated balance sheet as of December 31, 2021 was derived from the Company’s audited financial statements, but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2021 and notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 1, 2022. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2022 and condensed consolidated results of operations for the three and six months ended June 30, 2022 and 2021 and condensed consolidated cash flows for the six months ended June 30, 2022 and 2021 have been made. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.
Use of Estimates
The preparation of unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.
Significant estimates and assumptions include reserves and write-downs related to inventories, the recoverability of long term assets, valuation of common stock, stock-based compensation, intangible assets, goodwill, debt and related features, deferred tax assets and related valuation allowances and impact of contingencies.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments consisting of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities. Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the term loan approximates their fair value. The fair value of marketable debt securities is estimated using Level 2 inputs based on their quoted market values (Note 4).
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of risk consist principally of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents balances with established financial institutions and, at times, such balances with any one financial institution may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limits. As of June 30, 2022 and December 31, 2021, the Company also had cash on deposit with foreign banks of approximately $3.5 million and $4.6 million, respectively, that was not federally insured.
The Company earns revenue from the sale of its products to distributors and other customers such as hospitals. Sales of Zephyr Valves and delivery catheters accounted for most of the Company’s revenue for the six months ended June 30, 2022 and 2021. The Company’s accounts receivable are derived from revenue earned from customers and distributors. The Company performs ongoing credit evaluations of its customers’ and distributors’ financial condition and generally requires no collateral from its customers and distributors. At June 30, 2022 and December 31, 2021, no customer or distributor accounted for more than 10% of accounts receivable. During the three and six months ended June 30, 2022 and June 30, 2021, no customer or distributor accounted for more than 10% of revenue.
The Company relies on single source suppliers for the components, sub-assemblies and materials for its products. These components, sub-assemblies and materials are critical and there are no or relatively few alternative sources of supply. The Company’s suppliers have generally met the Company’s demand for their products and services on a timely basis in the past.
Foreign Currency Translation and Transaction Gains and Losses
The functional currencies of the Company’s wholly owned subsidiaries in Switzerland, Germany, Australia, the United Kingdom, France and Hong Kong are the Swiss franc. The functional currency of the Company’s subsidiary in Italy is the Euro. Accordingly, asset and liability accounts of Switzerland, Germany, Australia, the United Kingdom, Italy and Hong Kong operations are translated into U.S. dollars using the current exchange rate in effect at the balance sheet date and equity accounts are translated into U.S. dollars using historical rates. The revenues and expenses are translated using the average exchange rates in effect during the period, and gains and losses from foreign currency translation adjustments are included as a component of accumulated other comprehensive income in the condensed consolidated balance sheet. Foreign currency translation adjustments are recorded in other comprehensive income (loss) in the condensed consolidated statements of operations and comprehensive loss and was less than $0.1 million and less than $0.1 million during the three months ended June 30, 2022 and 2021, respectively, and less than $(0.1) million and $(0.2) million during the six months ended June 30, 2022 and 2021, respectively.
Foreign currency transaction gains and losses are included in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss and was $(0.2) million and $(0.1) million during the three months ended June 30, 2022 and 2021, respectively, and $(0.2) million and $0.1 million during the six months ended June 30, 2022 and 2021, respectively.
Net Loss per Share Attributable to Common Stockholders
Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options, and common stock subject to repurchase related to early exercise of stock options are considered to be potentially dilutive securities. Basic and diluted net loss attributable to common stockholders per share is presented in conformity with the two-class method required for participating securities. The Company considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities, because holders of such shares have non-forfeitable
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

dividend rights in the event a dividend is paid on common stock. The holders of the shares issued upon early exercise of stock options subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.
3.    Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning an interim period that includes or is subsequent to March 12, 2020, or prospectively from the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company may elect to apply ASU 2020-04 as its contracts referenced in London Interbank Offered Rate (“LIBOR”) are impacted by reference rate reform. The Company is currently evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. This new guidance will require financial instruments to be measured at amortized cost, and trade accounts receivable to be presented at the net amount expected to be collected. The new model requires an entity to estimate credit losses based on historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. In November 2019, the FASB issued ASU 2019-10, according to which, the new standard is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, including the Company, the new standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on the Company’s consolidated financial statements.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
4.    Fair Value Measurements
Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities;
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

Level 3—Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis—Financial assets and liabilities held by the Company measured at fair value on a recurring basis include money market funds and marketable securities.
Assets and Liabilities Measured and Recorded at Fair Value on a Nonrecurring Basis—The Company determines the fair value of long-lived assets held and used, such as intangible assets, by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. As noted above, there have been no impairment charges recorded to date. Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the term loan approximates the fair value and is classified as a Level 2 liability.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
The following tables summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
June 30, 2022
Level 1Level 2Level 3Total
Assets:
Money market funds
$2,192 $ $ $2,192 
Commercial paper
 2,497  2,497 
Cash equivalents2,192 2,497  4,689 
U.S. Government agency bonds25,171 8,971  34,142 
Commercial paper
 10,681  10,681 
Marketable securities25,171 19,652  44,823 
Total financial assets$27,363 $22,149 $ $49,512 
There were no liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2022.
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

December 31, 2021
Level 1Level 2Level 3Total
Assets:
Money market funds$831 $ $ $831 
Commercial paper 2,000  2,000 
Corporate bonds 4,410  4,410 
Cash equivalents831 6,410  7,241 
U.S. Government agency bonds14,977 5,504  20,481 
Commercial paper 19,107  19,107 
Corporate bonds 2,914  2,914 
Marketable securities14,977 27,525  42,502 
Total financial assets$15,808 $33,935 $ $49,743 
There were no liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2021.
The following table summarizes the cost, unrealized gains and losses and fair value of marketable securities (in thousands):
June 30, 2022
Amortized CostUnrealized LossesUnrealized GainsFair Value
U.S. Government agency bonds$34,462 $(320) $34,142 
Commercial paper
10,721 (40) 10,681 
Marketable securities$45,183 $(360)$ $44,823 
Amounts recognized on the consolidated balance sheet
Short-term marketable securities
40,139 
   Long-term marketable securities4,684 
Marketable securities$44,823 
December 31, 2021
Amortized CostUnrealized LossesUnrealized GainsFair Value
U.S. Government agency bonds$20,509 $(28)$ $20,481 
Corporate bonds
2,915 (1) 2,914 
Commercial paper
19,102  5 19,107 
Marketable securities$42,526 $(29)$5 $42,502 
Amounts recognized on the consolidated balance sheet
Short-term marketable securities
31,561 
   Long-term marketable securities10,941 
Marketable securities$42,502 
Accrued interest receivable on marketable securities of less than $0.1 million and less than $0.1 million as of June 30, 2022 and December 31, 2021, respectively, is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

5.    Balance Sheet Components
Cash and Cash Equivalents
The Company’s cash and cash equivalents consist of the following (in thousands):
June 30,December 31,
20222021
Cash$117,258 $141,239 
Cash equivalents:
Money market funds
2,192 831 
Commercial paper
2,497 2,000 
Corporate bonds 4,410 
Total cash and cash equivalents$121,947 $148,480 
Inventory
Inventory consists of the following (in thousands):
June 30,December 31,
20222021
Raw materials$3,776 $3,738 
Work in process784 518 
Finished goods14,652 12,029 
Total inventory$19,212 $16,285 
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
June 30,December 31,
20222021
Prepaid expenses$2,886 $1,869 
Prepaid insurance820 2,305 
VAT and other receivable25 362 
Other current assets 347 
Total prepaid expenses and other current assets$3,731 $4,883 
Capitalized Implementation Costs of a Hosting Arrangement
The Company has several software systems that are cloud-based hosting arrangements with service contracts. The Company accounts for costs incurred in connection with the implementation of these various software systems under ASU 2018-15, Intangibles—Goodwill and Other—Internal Use Software (Subtopic 350–40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The Company expenses all costs (internal and external) that are incurred in the planning and post-implementation operation stages. As of June 30, 2022, the Company has capitalized approximately $0.6 million in implementation costs related to the application development stage. The capitalized costs are amortized on a straight-line basis over the non-cancelable contract terms, which are generally three years. As of June 30, 2022, approximately $0.2 million
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

and $0.4 million capitalized costs were included in prepaid expenses and other current assets, and other long-term assets, respectively. Amortization expense, which was included in SG&A expenses, was less than $0.1 million and $0.1 million for the three and six months ended June 30, 2022.
Property and Equipment, Net
Property and equipment, net consist of the following (in thousands):
June 30,December 31,
20222021
Machinery and equipment$1,956 $1,635 
Computer equipment and software1,623 1,561 
Furniture and fixtures262 252 
Leasehold improvements2,277 2,277 
Construction in progress1,677 1,332 
Total7,795 7,057 
Less: accumulated depreciation(2,863)(2,243)
Property and equipment, net$4,932 $4,814 
Depreciation expense for the three months ended June 30, 2022 and June 30, 2021 was $0.3 million and $0.1 million, respectively. Depreciation expense for the six months ended June 30, 2022 and June 30, 2021 was $0.7 million and $0.2 million, respectively.
Goodwill
Goodwill was $2.3 million as of June 30, 2022 and December 31, 2021 arising from the Company’s acquisition of Emphasys Medical, Inc, in March 2009. No goodwill impairment losses have been recognized since the acquisition. There were no acquisitions or dispositions of goodwill in six months ended June 30, 2022 and 2021. The Company assesses goodwill for impairment annually, or more frequently, when events or changes in circumstances indicate there may be impairment. Through June 30, 2022, there have been no events or changes in circumstances that indicated that the carrying value of goodwill may not be recoverable. As a result, no impairment charge was recorded during the six months ended June 30, 2022.
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Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

Intangible Assets
Intangible assets consist of the following (in thousands):
June 30, 2022
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Developed technology$1,658 $(1,464)$194 
Trademarks191 (169)22 
Total intangible assets$1,849 $(1,633)$216 
December 31, 2021
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Developed technology$1,658 $(1,410)$248 
Trademarks191 (162)29 
Total intangible assets$1,849 $(1,572)$277 
Amortization expense relating to the intangibles totaled less than $0.1 million during each of the three months ended June 30, 2022 and June 30, 2021, respectively. Amortization expense relating to the intangibles totaled $0.1 million during each six months ended June 30, 2022 and June 30, 2021, respectively.
Future amortization expense is as follows as of June 30, 2022 (in thousands):
2022 (remaining six months)$62 
2023123 
202431 
Total amortization expense
$216 
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
June 30,December 31,
20222021
Accrued employee bonuses and commissions$3,179 $4,741 
Accrued vacation2,134 1,850 
Other accrued personnel related expenses2,308 2,145 
Accrued professional fees2,233 2,420 
Sales taxes, franchise tax and VAT602 730 
Liability for early exercise of stock options282 399 
Accrued inventory purchases128 258 
Other868 823 
Total accrued liabilities$11,734 $13,366 
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Pulmonx Corporation
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

6.    Long Term Debt and Convertible Notes
Term Loan
CIBC Loan
On February 20, 2020, the Company executed a Loan and Security Agreement (the “CIBC Agreement”) with Canadian Imperial Bank of Commerce (“CIBC”) to raise up to $32.0 million in debt financing (“CIBC Loan”) consisting of $17.0 million advanced at the closing of the agreement (“Tranche A”), with the option to draw up to an additional $8.0 million (“Tranche B”) and an additional financing tranche (“Tranche C”) of up to $7.0 million on or prior to February 20, 2022. Neither Tranche B nor Tranche C was drawn before the expiration date.
The CIBC Loan originally had a five-year term maturing on February 20, 2025, which included 24 months of interest only payments followed by 36 months of equal payments of principal and interest. The CIBC Loan bears interest at a floating rate equal to 1.0% above the Wall Street Journal Prime Rate at any time. The CIBC Loan is collateralized by substantially all of the Company’s assets, including cash and cash equivalents, accounts receivable, intellectual property and equipment. The Company may prepay the loan, subject to certain requirements. The CIBC Agreement includes customary restrictive covenants, financial covenants, events of default and other customary terms and conditions.
In April 2020, the Company entered into a First Amendment to CIBC Agreement that changed the maturity date to March 15, 2022, which would be automatically extended to February 20, 2025 if the maturity of all outstanding convertible notes was extended to a date no earlier than May 21, 2025 or all convertible notes converted into convertible preferred stock of the Company. An amendment fee of $0.2 million was paid. The amendment was accounted for as a debt modification and no gain or loss was recognized.
In December 2020, to address certain post-close covenants for which the Company was not in compliance, the Company entered into a Second Amendment to the CIBC Agreement that extended the compliance of such covenants to June 30, 2021.
In March 2021, the Company entered into an Amended and Restated CIBC Agreement which extended the maturity date from March 15, 2022 to February 20, 2025, and modified certain financial covenants. Per the amended terms, 36 equal payments of principal plus accrued interest would be due beginning March 31, 2022. In connection with the Amended and Restated agreement, the Company paid fees to CIBC of less than $0.1 million which were recorded as a discount on the CIBC Loan and are being accreted over the life of the term loan using the effective interest method. The amendment was accounted for as a debt modification and no gain or loss was recognized.
In June 2021, the Company entered into a First Amendment to the Amended and Restated Loan and Security agreement with CIBC that extended the compliance of certain post-close covenants to March 31, 2022.
In October 2021, the Company entered into a Second Amendment to the Amended and Restated Loan and Security Agreement with CIBC, which extended the interest only period of the loan from 24 months to 36 months. Under the amended terms, principal repayment will begin in February 2023. There was no change to the loan interest rate or maturity date.
As of June 30, 2022, the CIBC Loan had an annual effective interest rate of 4.71% per year.
The financial covenants in the CIBC Agreement require that, when the cash and cash equivalents of the Company is less than $100.0 million, the Company have revenue for the trailing three-month period ending on the last day of each fiscal quarter of not less than 80.0% of the revenue for the trailing three-month period, as set forth in the annual projections delivered to the CIBC. Further, the Company is required to maintain unrestricted cash in an aggregate amount equal to or greater than the Adjusted EBITDA loss as defined in the CIBC Agreement for the four-month period ending on any date of determination. As of June 30, 2022, the Company was in compliance with all covenants contained in CIBC Agreement.
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Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

The CIBC Loan consists of the following (in thousands):
June 30,December 31,
20222021
Term loan
$17,000 $17,000 
Less: debt issuance costs
(99)(131)
Term loan
$16,901 $16,869 
The Company paid $0.4 million fees to the lender and third parties which is reflected as a discount on the CIBC Loan and is being accreted over the life of the term loan using the effective interest method.
During the three months ended June 30, 2022 and 2021, the Company recorded interest expense related to debt discount and debt issuance costs of CIBC Loan of less than $0.1 million and less than $0.1 million, respectively. During the six months ended June 30, 2022 and 2021, the Company recorded interest expense related to debt discount and debt issuance costs of CIBC Loan of less than $0.1 million and $0.1 million, respectively.
Interest expense on the CIBC Loan amounted $0.2 million and $0.2 million during the three months ended June 30, 2022 and 2021, respectively. Interest expense on the CIBC Loan amounted $0.4 million and $0.4 million during the six months ended June 30, 2022 and 2021, respectively.
Credit Agreement
In April 2020, Pulmonx International Sàrl, a wholly-owned subsidiary of the Company, entered into a COVID-19 Credit Agreement with UBS Switzerland AG to receive up to 0.5 million Swiss Francs ($0.5 million U.S. dollar equivalent) under Swiss Federal Government program to mitigate the economic impact of the spread of the coronavirus. In May 2020, Pulmonx International Sàrl received $0.5 million Swiss Francs ($0.5 million U.S. dollar equivalent) under the COVID-19 Credit Agreement. The COVID-19 Credit Agreement bears no interest and is being repaid in twelve equal installments, paid semi-annually, beginning in March of 2022. As of June 30, 2022, Pulmonx International Sàrl paid less than $0.1 million to the lender.
Contractual Maturities of Financing Obligations
As of June 30, 2022, the aggregate future payments under the CIBC Loan and Credit Agreement (including interest payments) are as follows (in thousands):
2022 (remaining six months)$410 
20237,779 
20248,843 
20251,510 
202687 
202787 
Total18,716 
Less: unamortized debt discount(99)
Less: interest(1,236)
 Term loan and credit agreement
$17,381 
7.    Revenue Recognition
The Company’s contract liabilities consist of deferred revenue for remaining performance obligations by the Company to the customer after delivery, which was $0.1 million and $