LUNG 10-K & 10-Q changes, risk factors and insider trading

Although we require our third-party suppliers to supply us with components that meet our specifications and comply with applicable provisions of the FDA’s Quality Management System Regulation (“QSRQMSR”) and other applicable legal and regulatory requirements in our agreements and contracts, and we perform incoming inspection, testing or other acceptance activities to ensure the components meet our requirements, there is a risk that our suppliers will not always act consistent with our best interests, and may not always supply components that meet our requirements or supply components in a timely manner.

Although we have implemented policies and procedures designed to ensure compliance with applicable data privacy and information security laws and regulations and we take measures to protect sensitive information from unauthorized access or disclosure, there can be no assurance that these measures will be effective. We take steps designed to detect, mitigate, and remediate vulnerabilities in our IT systems (such as our hardware and/or software, including that of third parties with whom we work). However, we have not in the past, and may not in the future, detect and remediate all such vulnerabilities including on a timely basis. Unremediated high risk or critical vulnerabilities pose material risks to our business. Further, we have in the past, and may in the future, experienced delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Our IT and infrastructure, and other third parties,parties with whom we work, including technology partners and providers, face and may be vulnerable to a variety of evolving threats, including but not limited to social engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, ransomware attacks, software bugs, server malfunction, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fire, flood, attacks enhanced or facilitated by AI, and other similar threats. In addition to traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel misconduct or error (such as theft or misuse), sophisticated nation-state and nation-state supported actors now engage and are expected to continue to engage in cyberattacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory cyberattacks that could materially disrupt our systems, operations and supply chain.

Any of the previously identified or similar threats have in the past and may in the future cause a security incident or other interruption that have in the past or may in the future result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties with whom we work. Although the aggregate impact of security incidents on our operations and financial condition has not been material to date, we have occasionally been the target of events of this nature and expect them to continue as security threats have been rapidly evolving in sophistication and becoming more prevalent in the industry. For example, we have been the target of unsuccessful phishing attempts in the past and expect such attempts will continue in the future. Additionally, the Company launched the LungTraX Platform in 2024 which will involveinvolves the processing of more patient PHI in the Company-managed system in our capacity as a Business Associate (as defined by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)), the unintended release of which could have additional material adverse impacts on the Company financially and reputationally. Advances in computer capabilities, new technological discoveries or other developments may result in cyberattacks becoming more sophisticated and more difficult to detect. We and our third-party service providers may not have the resources or technical sophistication to anticipate or prevent all such cyberattacks. Moreover, techniques used to obtain unauthorized access to systems or other information technology infrastructure change frequently and may not be detected until after an incident has occurred. We are investing in protections and monitoring practices related to our data and IT to reduce these risks and continue to monitor our systems on an ongoing basis for any current or potential threats. However, it may be difficult and/or costly to detect, investigate, mitigate, contain, and remediate a security incident. Our efforts to do so may not be successful. Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain, and remediate a security incident could result in outages, data losses, and disruptions of our business. Threat actors may also gain access to other networks and systems after a compromise of our networks and systems. WeFor example, threat actors may use an initial compromise of one part of our environment to gain access to other parts of our environment, or leverage a compromise of our networks or systems to gain access to the networks or systems of third parties with whom we work, such as through phishing or supply chain attacks.We may expend significant resources or modify our business activities (including our clinical trial activities) to try to protect against security incidents. Certain data privacy and information security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information. We cannot assure you that our efforts will prevent breakdowns or breaches to our or our third-party providers’ databases or systems, and such breakdowns and breaches could negatively affect our business, financial condition and results of operations and our reputation.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. The reliability and continuous availability of our LungTraX Platform is critical to our success. However, software such as ours, or that of third parties that we utilize within the LungTraX Platform, can contain errors, defects, security vulnerabilities or software bugs that are difficult to detect and correct, particularly when such vulnerabilities are first introduced or when new versions or enhancements of our platform are released. The LungTraX Platform is a new service for us and we have limited experience installing and managing this platform and the services that we render though this platform. We have not and may not detect and remediate all such vulnerabilities including on a timely basis. Additionally, even if we are able to develop a patch or other fix to address such vulnerabilities, such fix may be difficult to push out to our customers or may otherwise be delayed. Additionally, our business dependsemploys upona theshared appropriateresponsibility model where our customers are responsible for using, configuring, and successfulotherwise implementationimplementing ofsecurity measures related to our platform byin oura customers.manner that meets applicable cybersecurity standards, complies with laws, and addresses their information security risk. If our customers fail to use our platform according to our specifications, our customers may suffer a security incident on their own systems or other adverse consequences. Even if we are not the cause of the resulting customer security issue or incident and such an incident is unrelated to our security practices, itwe could result in our incurring ofincur significant economic and operational costs in investigating, remediating, and implementing additional measures to further protect our customers from their own vulnerabilities, and it could result in reputational harm.

•the cost of manufacturing our products, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers and manufacturers which are subject to macroeconomic factors including fluctuating inflation and interest rates, as well as tariffs, the threat of new or increased tariffs, trade disputes and escalating trade tensions, and changes in trade agreements;

InOn March 2021,2, 2026, we entered into ana AmendedCredit Agreement and Restated Loan and Security AgreementGuaranty (as amended, the “CIBCPerceptive Credit Agreement”) with Canadianthe Imperialsubsidiary Bankguarantors ofparty Commercethereto from time to time, the lenders party thereto from time to time, and Perceptive Credit Holdings V, LP (“CIBCPerceptive”), as the initial lender, administrative agent and collateral agent, under which we have borrowed $37.0$40.0 million in debt financing as of DecemberMarch 31,2, 2024.2026. See the section entitled “Management’sSubsequent DiscussionEvents and- AnalysisPerceptive ofCredit Financial Condition and Results of Operations⸺Liquidity and Capital Resources; Plan of Operation⸺CIBC LoanAgreement” andin the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

In addition, the CIBCPerceptive Credit Agreement contains, and any agreements evidencing or governing other future indebtedness may contain, certain covenants that limit our ability to engage in certain transactions that may be in our long-term best interests. Subject to certain limited exceptions, these covenants limit our ability to, among other things:

•create, incur, assume orassume, be liable for or make payments on any additional indebtedness, or create, incur, allow or permit to exist any additional liens;

•make certain investments and;

•enter into transactions with our affiliates; andaffiliates.

There can be no guarantee that we will not breach these covenants. Our ability to comply with these covenants may be affected by events and factors beyond our control. In the event that we breach one or more covenants, our lenderlenders may choose to declare an event of default and require that we immediately repay all amounts outstanding, terminate any commitment to extend further credit and foreclose on the collateral granted to it to collateralize such indebtedness. The occurrence of any of these events could negatively affect our business, financial condition and results of operations.

Since inception, we have incurred significant net losses and expect to continue to incur net losses for the foreseeable future. Since our inception, our operations have been financed primarily through the sale of equity securities, debt financing arrangements and sales of our products. As of December 31, 2024,2025, we had $101.5$69.8 million in cash,cash and cash equivalents and marketable securities,equivalents, and an accumulated deficit of $467.6$521.6 million. Based on our current planned operations, we expect our cash,cash and cash equivalents and short-term marketable securities will enable us to fund our operating expenses for at least the next twelve months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and other personnel. We are highly dependent upon our management team, particularly our Chief Executive Officer, the rest of our senior management, and other key personnel. From time to time, there have been and may in the future be changes in our management team or other key employees resulting from the hiring or departure of these personnel. For example, in MarchOctober 2024,2025, Glendonwe Frenchannounced retired as the President and Chief Executive Officer of the Company. Our board of directors appointedthat Steven Williamson resigned as our President and Chief Executive Officer and as a member of our board of directors.directors Additionally,and in April 2024,that Mehul Joshi was appointedresigned as Chief Financial OfficerOfficer. ofWe thealso Companyannounced andthat JohnGlendon McKune,E. ourFrench Interimwould Chief Financial Officer, returned to his prior positionreturn as the Company’s Vice President Finance and CorporateChief Controller.Executive Officer and Derrick Sung, Ph.D. would rejoin the Company as our Chief Operating Officer and Chief Financial Officer. The failure to successfully execute this leadership transition could negatively impact our business and results of operations. Although we have entered into employment letter agreements with our executive officers, each of them may terminate their employment with us at any time. The replacement of any of our key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives and could therefore negatively affect our business, financial condition and results of operations. In addition, we do not carry any key person insurance policies that could offset potential loss of service under applicable circumstances.

Further, job candidates and existing employees, particularly in the San Francisco Bay Area, often consider the value of the stock awards they receive in connection with their employment. If the perceived value of our stock awards declines, it may harm our ability to recruit and retain highly skilled employees. Many of our employees have become or will soon become vested in a substantial amount of our common stock or a number of common stock options. Our employees may be more likely to leave us if the shares they own have significantly appreciateddepreciated in value relative to the original purchase prices of the shares, or if the exercise prices of the options that they hold are significantly belowabove the market price of our common stock. Our future success also depends on our ability to continue to attract and retain additional executive officers and other key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, it will negatively affect our business, financial condition and results of operations.

Sales in markets outside of the United States accounted for approximately 32.6%37.0% and 33.1%32.6% of our revenue for the years ended December 31, 20242025 and December 31, 2023,2024, respectively. We currently focus our international sales and marketing efforts in Australia, Austria, Belgium, China, Denmark, France, Germany, Ireland, Italy, Japan, the Netherlands, SouthSpain, Korea, Spain,Sweden, Switzerland and the United Kingdom. International sales are subject to a number of risks, including:

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. A severe or prolonged economic downturn, such as the global financial crisis of 2008, could result in a variety of risks to our business, including weakened demand for our solution, and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy, including due to the impact of inflationary pressures, tariffs, trade disputes, escalating trade tensions and other political tensions between the U.S. and other countries, could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing will negatively affect our business, financial condition and results of operations and we cannot anticipate all of the ways in which the economic climate and financial market conditions could negatively affect our business, financial condition and results of operations.

Disruptions at the FDA and other agencies may also slow the time necessary for new devices to be reviewed and/or approved or cleared by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 3543 days beginning on DecemberOctober 22,1, 2018,2025, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, or if global health concerns prevent the FDA or other regulatory authorities from conducting business as usual or conducting inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

In December 2022, we received a civil investigative demand (“CID”) from the U.S. Department of Justice, Civil Division (“USDOJ”) in connection with an investigation under the Anti-Kickback Statute and False Claims Act (the “Investigation”).Act. The CID requestsrequested information and documents regarding our relationships with certain health care providers, medical practices, and hospitals in connection with the sales and marketing of the Zephyr Valves and related products and services. WeSubsequently, areon fullyor cooperatingabout January 27, 2025 the US DOJ filed on behalf of itself and certain states attorneys general, a Notice of Election to Decline Intervention in and to unseal the underlying action filed by an individual (the “Relator”) in U.S. District Court for the Northern District of California (the “Qui Tam Action”). In December 2025, the Company entered into a settlement agreement with the Investigation.Relator Wewith areapproval unableby the US DOJ and the various states’ attorneys general who were parties to express a view at this time regarding the ultimateQui outcomeTam ofAction. theThe InvestigationQui orTam estimateAction anwas amount or range of reasonably possible loss. Dependingdismissed on theDecember outcome22, of the Investigation, there could be a material impact on our business, results of operations and financial condition.2025.

If we or our suppliers fail to comply with the FDA’s QSRQMSR or the European Union MDR, our manufacturing or distribution operations could be delayed or shut down and our revenue could suffer.

Our manufacturing and design processes and those of our third-party suppliers are required to comply with the FDA’s QSRQMSR and the European Union MDR, including Quality Management System requirements, both of which cover procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of Zephyr Valves, the AeriSeal System, the Chartis Catheter and the Chartis Console. We are also subject to similar state requirements and licenses, and comply with ongoing International Organization for Standardization (“ISO”) in all operations, including design, manufacturing, and service, to maintain our CE Marks. In addition, we must engage in extensive recordkeeping and reporting and must make available our facilities and records for periodic unannounced inspections by governmental agencies, including the FDA, state authorities, competent authorities of EU Member States, European Union Notified Bodies and comparable authorities in other countries. If we fail a regulatory inspection, our operations could be disrupted and our manufacturing interrupted. Failure to take adequate corrective action in response to an adverse regulatory inspection could result in, among other things, a shutdown of our manufacturing or product distribution operations, significant fines, suspension of marketing clearances, certification and approvals, seizures or recalls of our device, operating restrictions and criminal prosecutions, any of which would negatively affect our business, financial condition and results of operations. Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with applicable regulatory requirements, which may result in manufacturing delays for our product and cause our revenue to decline.

We are registered with the FDA as a manufacturer. The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA and the Food and Drug Branch of the CDPH to determine our compliance with the QSRQMSR and other regulations at our manufacturing facility, and these inspections may include the manufacturing facilities of our suppliers. We believe that we are in compliance, in all material respects, with the QSR.QMSR.

We can provide no assurance that we will continue to remain in compliance with the QSR,QMSR, MDR, and MDD, as applicable to our products. If the FDA, CDPH, BSI or competent authorities of EU Member States inspect any of our facilities and discover compliance problems, we may have to cease manufacturing and product distribution until we can take the appropriate remedial steps to correct the audit findings. Taking corrective action may be expensive, time consuming and a distraction for management and if we experience a delay at our manufacturing facility, we may be unable to produce our solutions, which will negatively affect our business, financial condition and results of operations.

We and the third parties with whom we work are subject to stringent and evolving obligations related to data privacy and information security. Our (or the third-partiesthird parties with whom we work) actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; a disruption of our business operations; reputational harm; loss of revenue or profits; loss of customers; and other adverse business impacts.

New data privacy and information security laws are being enacted in the United States on the federal, state, and globally,local levels, and existing ones are being updated and strengthened. Numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations on covered business, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. For example, the California Consumer Privacy Act (“CCPA”) went into effect on January 1, 2020 and requires companies that process personal data on California residents to make new disclosures to consumers about their data collection, use and sharing practices, and allow consumers to opt out of certain data sharing with third parties. The CCPA also provides for civil penalties for violations (up to $7,500 per intentional violation), as well as a private right of action for certain data breaches that is expected to increase data breach litigation. In addition, the California Privacy Rights Act of 2020 (“CPRA”), which became effective on January 1, 2023, expands the compliance requirements and rights available to consumers under the CCPA. The CPRA also establishes a new California Privacy Protection Agency to implement and enforce the CCPA (as amended), which could increase the risk of an enforcement action. As such, the CPRA may require additional compliance investment and potential business process changes in the meantime. Other states, such as Virginia, Colorado, Utah and Connecticut, have also passed comprehensive data privacy laws, and similarSimilar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future. While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts, and increase legal risk and compliance costs for us and the third parties with whom we work. Complying with these numerous, complex and often changing regulations is expensive and difficult, and failure to comply with any data privacy and information security laws or any security incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive data, such as personal data, confidential patient or consumer information, whether by us, one of our business associates or another third-party, could negatively affect our business, financial condition and results of operations, including but not limited to: investigation costs, material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy and security practices; requirements that we provide notices, credit monitoring services or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; and injunctive relief.

Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and information security. For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”) (collectively, “GDPR”) governs the processing (which can include any action, such as collection, use, storage adaptation or alteration, disclosure or transfer) of personal data relating to individuals located in Europe (including the UK). Among other things, the GDPR sets out extensive compliance requirements, including providing detailed disclosures about how personal data is collected and processed, demonstrating that an appropriate legal basis is in place to justify data processing activities; granting various rights for data subjects in regard to their personal data, such as the right to delete certain personal data, as well as enhancing pre-existing rights (e.g., data subject access requests); introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; imposing limitations on retention of personal data; maintaining a record of data processing; complying with the principle of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit; and expanding the definition of personal data to include coded data and requiring changes to informed consent practices, as well as more detailed notices for clinical trial subjects and investigators. The GDPR imposes substantial fines for breaches and violations (up to the greater of €20 million, £17.5 million, or, in each case, 4% of our global turnover, whichever is greater)., and companies may also face temporary or definitive bans on data processing and other corrective actions. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR.

In the ordinary course of business, we transfer personal data from Europe and other jurisdictions to the United States or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the EEA and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt or have already adopted similarly stringent data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations. Regulators in the United States such as the Department of Justice are also increasingly scrutinizing certain personal data transfers and have enacted data localization requirements, including, for example, the executive order on Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern issued in February 2024.

Moreover, complying with the various data privacy and information security laws that are applicable to us could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. In addition, these obligations may require us to change our business model. Any failure (or perceived failure) to comply could result in government enforcement actions (which could include civil or criminal penalties), private litigation,litigation and mass arbitration demands, additional reporting requirements and/or oversight, bans or restrictions on processing personal data, orders to destroy or not use personal data, imprisonment of company officials, and/or adverse publicity and could negatively affect our operating results and business. ClaimsIn thatparticular, weplaintiffs have violatedbecome individuals’increasingly privacymore rights,active failedin tobringing complyprivacy-related withclaims privacyagainst laws,companies, orincluding breachedclass ourclaims contractualand obligations,mass evenarbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if weviable, arecarry notthe foundpotential liable,for couldmonumental bestatutory expensivedamages, depending on the volume of data and timethe consuming to defend, could result in adverse publicity and could have a material adverse effect on our business, financial condition, and resultsnumber of operations.violations.

Our employees and personnel use generative AI (“AI”) technologies to perform their work, and the disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.

Several jurisdictions around the globe, including Europe and certain U.S. states, have proposed or enacted laws governing AI/machine learning (“ML”).technologies. For example, European regulators enacted a stringent AI regulation, and we expect other jurisdictions will adopt similar laws. Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our use of AI/ML.AI. These obligations may make it harder for us to conduct our business using AI/ML,AI, lead to regulatory fines or penalties, require us to change our business practices, retrain our AI/ML,AI, or prevent or limit our use of AI/ML.AI. For example, the FTC has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML where they allege the company has violated privacy and consumer protection laws. If we cannot use AI/ML or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage.

Our research, development and manufacturing operations involve the use of hazardous substances, and we are subject to a variety of federal, state, local and foreign environmental laws and regulations relating to the storage, use, handling, generation, manufacture, treatment, discharge and disposal of hazardous substances. Our products may also contain hazardous substances, and they are subject to laws and regulations relating to labeling requirements and to their sale, collection, recycling, treatment, storage and disposal. Compliance with these laws and regulations may be expensive and noncompliance could result in substantial fines and penalties. Environmental laws and regulations also impose liability for the remediation of releases of hazardous substances into the environment and for personal injuries resulting from exposure to hazardous substances, and they can give rise to substantial remediation costs and to third-party claims, including for property damage and personal injury. Liability under environmental laws and regulations can be joint and several and without regard to fault or negligence, and they tend to become more stringent over time, imposing greater compliance costs and increased risks and penalties associated with violations. We cannot assure you that violations of these laws and regulations, or releases of or exposure to hazardous substances, will not occur in the future or have not occurred in the past, including as a result of human error, accidents, equipment failure or other causes. The costs of complying with environmental laws and regulations, and liabilities that may be imposed for violating them, or for remediation obligations or responding to third-party claims, could negatively affect our business, financial condition and results of operations.

In 2018, we received pre-market approval (“PMA”) from the U.S. Food and Drug Administration (“FDA”) for the Zephyr Valve,Valve following its “Breakthrough Technology”Device designation. The Zephyr Valve is commercially available in numerous countries globally. We have established reimbursement in major markets in North America, Europe and Asia Pacific and the Zephyr Valve has been included in treatment guidelines for COPD worldwide.

To date, we have financed our operations primarily through the sale of our products, the sale of equity securities, and debt financing arrangements and sales of our products.arrangements. We have devoted substantially all of our resources to research and development activities related to our solution, including clinical and regulatory initiatives to obtain marketing approval, sales and marketing activities, and investing in general and administrative infrastructure. We generated revenue of $90.5 million, with a gross margin of 74.2% and a net loss of $54.0 million, for the year ended December 31, 2025 compared to revenue of $83.8 million, with a gross margin of 74.0% and a net loss of $56.4 million, for the year ended December 31, 2024 compared to revenue of $68.7 million, with a gross margin of 73.9% and a net loss of $60.8 million, for the year ended December 31, 2023.2024. As of December 31, 2024,2025, we had an accumulated deficit of $467.6$521.6 million, cash,cash and cash equivalents and marketable securities of $101.5$69.8 million, and $37.2$37.1 million of outstanding term loans and credit agreements, net of debt discount and debt issuance costs.

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

We intend to continue to promote awareness of our solution through training and educating physicians, pulmonary rehabilitation centers, key opinion leaders and various medical societies on the proven clinical benefits of Zephyr Valves. In addition, we intend to continue to publish additional clinical data in various industry and scientific journals and online and to present at various industry conferences. We plan to continue building patient awareness through our direct-to-patient marketing initiatives, which include advertising, social media and online education. We also intend to continue helping physicians in their outreach to patients and other healthcare providers. These efforts require significant investment by our marketing and sales organization, and vary depending upon the physician’s practice specialization, and personal preferences and geographic location of physicians, pulmonary rehabilitation centers and patients. In order to grow our business, we will need to continue to make significant investments in training and educating hospitals, physicians and patients on the advantages of our solution for the treatment of severe emphysema. We are also working to improve the efficiency of our commercial initiatives for treating centers to accelerate patient identification and treatment conversion.

We currently derive substantially all of our revenue from the sale of our products to hospitals and distributors. We market and sell our products through a direct sales organization in the United States and through direct sales and several third-party distributors in select markets outside the United States. We currently generate most of our revenue from the sales of Zephyr Valves and delivery catheters. We also generate a smaller amount of our revenue from our Chartis System, which is comprised of sales of the balloon catheters, usage fees and sales of the Chartis console.console, Theand from our LungTraX Platform, which is used to help identify patients potentially eligible for treatment with Zephyr Valves, has not independently generated any revenue for us.Valves. No single customer accounted for more than 10% of our revenue during the years ended December 31, 20242025 and December 31, 2023.2024.

Other Income (Expense),Income, Net

Other income (expense),income, net primarily consists of foreign currency exchange gains and losses.

Revenue increased by $15.1$6.7 million, or 22.0%,8.0%, to $90.5 million during the year ended December 31, 2025, compared to $83.8 million during the year ended December 31, 2024, compared to $68.7 million during the year ended December 31, 2023.2024. The sale of products in the United States increased by $10.5$0.6 million to $56.5$57.0 million during the year ended December 31, 2024,2025, compared to $45.9$56.5 million for the year ended December 31, 2023.2024. The sale of products in international markets increased by $4.6$6.2 million to $27.3$33.5 million during the year ended December 31, 2024,2025, compared to $22.8$27.3 million for the year ended December 31, 2023.2024. The increase in revenue reflects continued growth of Zephyr Valve procedure volumes in the United States and in international markets.volumes.

Cost of goods sold increased by $3.9$1.6 million, or 21.6%,7.2%, to $23.4 million during the year ended December 31, 2025, compared to $21.8 million during the year ended December 31, 2024, compared to $17.9 million during the year ended December 31, 2023.2024. The increase was mainly due to an increase in the number of products sold and increased manufacturing costs as we invested to support anticipated growth.sold. Gross margin was 74.2% during the year ended December 31, 2025, compared to 74.0% during the year ended December 31, 2024, compared to 73.9% during the year ended December 31, 2023.2024.

Research and development expenses decreasedincreased by $0.5$1.9 million, or 2.8%,10.9%, to $19.5 million during the year ended December 31, 2025, compared to $17.6 million during the year ended December 31, 2024, compared to $18.1 million during the year ended December 31, 2023.2024. The decreaseincrease in research and development expenses was primarily due to aan decreaseincrease of $1.8 million in professional services and other expenses in support of product development, a decrease of $0.2 million in personnel-related expenses including stock-based compensation, and a decrease of $0.1$2.2 million in costs associated with our clinical trials, including fees paid to contractclinical research organizationsorganizations, an increase of $0.8 million in payroll and testingpersonnel-related expenses.expenses, and an increase of $0.7 million in services and other expenses in support of product development. These decreasesincreases were offset by a non-cash impairment charge of $1.7$1.9 million related to certain previously capitalized software development costs recorded in the second quarter of 2024.

Selling, general and administrative expenses increaseddecreased by $7.5$0.8 million, or 8.0%,0.8%, to $101.3 million during the year ended December 31, 2025 compared to $102.1 million during the year ended December 31, 2024 compared to $94.6 million during the year ended December 31, 2023.2024. The increasedecrease in selling, general and administrative expenses was primarily due to ana increasedecrease of $3.9 million in advertising and marketing related expenses, an increase of $2.2$2.5 million in payroll and personnel-related expenses including stock-based compensation for our sales, marketing and administrative personnel, a decrease of $0.4 million in professional services consulting expenses, and a decrease of $0.3 million in facilities and other expenses, offset by an increase of $1.0$2.4 million in traveladvertising and conferencemarketing related expenses.

Interest expense increaseddecreased by $0.3$0.4 million, or 8.5%,10.0%, to $3.2 million during the year ended December 31, 2025, compared to $3.5 million during the year ended December 31, 2024, comparedprimarily due to $3.2lower interest rates. Interest income decreased by $2.4 million, or 47.6%, to $2.7 million during the year ended December 31, 2023,2025 primarily due to higher interest rates. Interest income decreased by $0.5 million, or 9.1%,compared to $5.1 million during the year ended December 31, 2024 compared to $5.6 million during the year ended December 31, 2023.2024. The decrease was primarily due to a lower balance of cash, cash equivalents, and marketable securities, which resulted in reduced returns on these assets.

Other Income (Expense),Income, Net

Other income (expense),income, net increased by $0.9$0.5 million to $0.8 million during the year ended December 31, 2025, compared to $0.3 million during the year ended December 31, 2024, compared to $(0.7) million during the year ended December 31, 2023, primarily due to foreign currency exchange gains.

To date, we have financed our operations primarily through sales of our IPO,products, our initial public offering, private placements of equity securities, and debt financing arrangements and sales of our products.arrangements. As of December 31, 2024,2025, we had cash,cash and cash equivalents and marketable securities of $101.5$69.8 million, an accumulated deficit of $467.6$521.6 million, and $37.2$37.1 million outstanding under the CIBC LoanAmended and Restated CIBC Credit Agreement,Agreement (as defined below), net of debt discount and debt issuance costs.

Net cash used in operating activities was $31.5$32.4 million for the year ended December 31, 2024.2025. Cash used in operating activities was primarily a result of the net loss of $56.4$54.0 million, a decrease in accrued liabilities of $2.3 million primarily due to payment of incentive compensation in the first quarter of fiscal year 2025, associated with the achievement of performance objectives under the fiscal year 2024 incentive plan, a decrease in lease liabilities of $1.0 million due to lease payments, an increase in inventories of $0.8 million largely due to an increase in raw materials, and net accretion of discounts on marketable securities of $1.6$0.4 million. This was partially offset by stock-based compensation expense of $21.2 million, non-cash lease expense of $1.4 million, a decrease in lease liabilities of $1.9 million due to lease payments, an increase in accounts receivable of $1.3$1.1 million primarily due to revenue growth and the timing of payments from our customers, andepreciation increaseand amortization expense of $1.1 million, a decrease in prepaid expenses and other current assets of $0.4$0.8 million primarily due to the timing of payments to our vendors, an increase in accounts payable of $0.3 million due to the timing of payments to our vendors, and an increase in otherincome assets of $0.5 million primarily due to capitalized implementation costs of a hosting arrangement. This is partially offset by stock-based compensation expense of $23.0 million, an increase in accountstaxes payable of $2.3 million due to timing of payments to our vendors, a non-cash impairment charge of $1.7 million related to certain previously capitalized software development costs recorded in the second quarter of 2024, depreciation and amortization expense of $1.5 million and non-cash lease expense of $1.8$0.2 million.

Net cash used in operating activities was $37.6$31.5 million for the year ended December 31, 2023.2024. Cash used in operating activities was primarily a result of the net loss of $60.8$56.4 million, net accretion of discounts on marketable securities of $1.6 million, a decrease in lease liabilities of $3.2$1.9 million due to lease payments, an increase in accounts receivable of $3.1$1.3 million due to revenue growth and the timing of payments from our customers, netan accretionincrease in prepaid expenses and other current assets of discounts$0.4 onmillion marketableprimarily securitiesdue to the timing of $1.0payments to our vendors, and an increase in other assets of $0.5 million primarily due to capitalized implementation costs of a hosting arrangement. This was partially offset by stock-based compensation expense of $23.0 million, andan a decreaseincrease in accounts payable of $0.3$2.3 million due to timing of payments to our vendors, partiallya offsetnon-cash byimpairment ancharge increaseof $1.7 million related to certain previously capitalized software development costs recorded in accruedthe liabilitiessecond quarter of $3.2 million due to increased accrued incentive compensation expense associated with the achievement of performance objectives, a decrease in inventory of $0.9 million, stock-based compensation expense of $22.1 million, non-cash lease expense of $2.7 million,2024, depreciation and amortization expense of $1.5 million and write-downnon-cash lease expense of inventory of $0.5$1.8 million.

Net cash provided by investing activities in the year ended December 31, 20242025 was $17.5$30.5 million consisting of proceeds from maturities of marketable securities of $46.8$36.6 million, partially offset by purchases of marketable securities of $27.9$5.7 million and purchases of property and equipment of $1.4$0.5 million.

Net cash usedprovided inby investing activities in the year ended December 31, 20232024 was $2.0$17.5 million consisting of proceeds from maturities of marketable securities of $46.8 million, partially offset by purchases of marketable securities of $46.2$27.9 million and purchases of property and equipment of $0.8 million partially offset by proceeds from maturities of marketable securities of $45.0$1.4 million.

Net cash provided by financing activities in the year ended December 31, 20242025 of $1.4$0.8 million primarily relates to proceeds from issuance of common stock under the employee stock purchase plan of $1.2$0.8 million and proceeds from exercise of common stock options of $0.2 million, partially offset by repayment of debt under the Credit Agreement of $0.1 million and payment of debt issuance cost of $0.1 million.

Net cash provided by financing activities in the year ended December 31, 20232024 of $21.4$1.4 million primarily relates to proceeds of $20.0 million from borrowing under the Amended and Restated CIBC Agreement, proceeds from issuance of common stock under the employee stock purchase plan of $1.2 million and proceeds from exercise of common stock options of $0.3$0.2 million, partially offset by repayment of debt under the Credit Agreement of $0.1 million.

As of December 31, 2024,2025, we had cash,cash and cash equivalents and marketable securities of $101.5$69.8 million. Based on our current planned operations,operations and the refinancing of debt described in the section titled “Subsequent Events⸺Perceptive Credit Agreement” in the notes to our consolidated financial statements, we expect that our cash,cash and cash equivalents and marketable securities will enable us to fund our operating expenses for at least 12 months from the issuance of our financial statements as of and for the year ended December 31, 2024.2025. We believe we will meet longer-term expected future cash requirements and obligations through a combination of available cash,cash and cash equivalents and marketable securities,equivalents, debt financings, and access to other public or private equity offerings. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

We review our inventories for classification purposes. 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. We consider forecasted demand and other expected usage of inventory on hand when estimating long-term inventory.

We have incurred net losses since our inception. For the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, we had net losses of $13.7$23.7 million and $14.4$29.6 million, respectively, and we expect to continue to incur additional losses. As of MarchJune 31,30, 2026, we had an accumulated deficit of $535.2$545.3 million. We expect to continue to incur significant sales and marketing, research and development, regulatory and other expenses as we grow our sales force and expand our marketing efforts to increase adoption of our products, expand existing relationships with our customers, obtain regulatory clearances, certification or approvals for our planned or future products, conduct clinical trials on our existing and planned or future products and develop new products or add new features to our existing products. The net losses that we incur may fluctuate significantly from period to period. We will need to generate significant additional revenue in order to achieve and sustain profitability. Even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time.

Our success will depend on our ability to bring awareness to our solution, and the Zephyr Valve in particular, and educate hospitals and physicians regarding the benefits of our solution over existing products and services and to encourage those parties to recommend our solution to their patients. Sales of Zephyr Valves and delivery catheters accounted for most of our revenue for the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 and we expect that sales of Zephyr Valves and delivery catheters will continue to account for most of our revenue going forward. We do not know if our solution will be successful over the long term. Moreover, market acceptance may be hindered if physicians are not presented with compelling data demonstrating the efficacy of our solution compared to alternative procedures and technologies. Any studies we, or third parties which we sponsor, may conduct comparing our solution with alternative treatments for severe emphysema will be expensive, time consuming and may not yield positive results. Additionally, adoption will be directly influenced by a number of financial factors, including the ability of providers to obtain sufficient reimbursement from payors for deploying our solution. The safety, efficacy, performance and cost-effectiveness of our solution, on a stand-alone basis and relative to competing treatments and services, will determine the willingness of payors to cover the procedure. While we have established positive coverage policies with major national private payors, such as Aetna, Anthem Blue Cross Blue Shield, Blue Cross Blue Shield of Michigan, Humana, Health Care Service Corporation, and Highmark, other commercial payors, including other plans in the Blue Cross Blue Shield family of plans, do not currently consider our solution medically necessary. No matter the level of coverage by the commercial payor, each patient is generally considered on a case-by-case basis. In addition, Medicare, currently without a public coverage policy, covers our solution for patients when medically necessary on a case-by-case basis. Physicians may be reluctant to recommend our solution to patients covered by such plans with no specific policies because of the uncertainty surrounding reimbursement, rates and the administrative burden of interfacing with patients to answer their questions and support their efforts to obtain adequate reimbursement for our solution. If physicians do not adopt and recommend our solution, it will negatively affect our business, financial condition and results of operations.

We currently derive substantially all of our revenue from the sale of our products to hospitals and distributors and expect this to continue for the foreseeable future. We primarily sell Zephyr Valves through a direct sales force that primarily engages with pulmonologists in the United States, Europe and Asia Pacific. Hospitals typically bill various third-party payors to cover all or a portion of the costs and fees associated with the procedures in which our solution is used and bill patients for any deductibles or co-payments. As of MarchJune 31,30, 2026, commercial payors such as Aetna, Humana, and many of the largest Blue Cross Blue Shield plans including Anthem, Health Care Service Corporation, BCBS Michigan, and Highmark have issued positive coverage policies for endobronchial valve procedures. United Healthcare removed the endobronchial valve codes from their non-covered list, and as such no longer considers the procedure unproven or experimental. Other commercial payors, including other plans in the Blue Cross Blue Shield family of plans, do not yet consider our solution medically necessary. Medicare, currently without a public coverage policy, covers our solution for patients when medically necessary on a case-by-case basis, and other commercial insurers not described above are approving prior authorization requests on a case-by-case basis.

On March 2, 2026, we entered into a Credit Agreement and Guaranty (the “Perceptive Agreement”) with the subsidiary guarantors party thereto from time to time, the lenders party thereto from time to time, and Perceptive Credit Holdings V, LP (“Perceptive”), as the initial lender, administrative agent and collateral agent, under which we have borrowed $40.0 million in debt financing as of MarchJune 31,30, 2026. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources; Plan of Operation - Perceptive Loan” and the notes to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Since inception, we have incurred significant net losses and expect to continue to incur net losses for the foreseeable future. Since our inception, our operations have been financed primarily through the sale of equity securities, debt financing arrangements and sales of our products. As of MarchJune 31,30, 2026, we had $61.6$55.8 million in cash and cash equivalents, and an accumulated deficit of $535.2$545.3 million. Based on our current planned operations, we expect our cash and cash equivalents will enable us to fund our operating expenses for at least the next twelve months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Sales in markets outside of the United States accounted for approximately 35.6%36.7% and 36.9%37.6% of our revenue for the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively. We currently focus our international sales and marketing efforts in Australia, Austria, Belgium, China, Denmark, France, Germany, Ireland, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom. International sales are subject to a number of risks, including:

We also maintain a CE Certificate of Conformity in accordance with the MDD and a separate CE Certificate of Conformity in accordingaccordance with the MDR for the design and manufacture of our products issued by BSI in the Netherlands, our European Notified Body. We believe that we are in compliance, in all material respects, with the MDD and MDR, as applicable to our products.

We market and sell our products in the United States through a direct sales organization. Our sales territory managers are focused on promoting awareness and increasing adoption of our solution primarily among the pulmonologists performing interventional pulmonary procedures across approximately 500 high-volume hospitals in the United States. We are expanding our commercial operations in the United States while continuing to foster our international growth. We employ both direct and distributor-based sales models, with 99% of our revenue generated in markets where we sell directly for the threesix months ended MarchJune 31,30, 2026.

To date, we have financed our operations primarily through the sale of our products, the sale of equity securities, and debt financing arrangements. We have devoted substantially all of our resources to research and development activities related to our solution, including clinical and regulatory initiatives to obtain marketing approval, sales and marketing activities, and investing in general and administrative infrastructure. We generated revenue of $20.6$22.8 million, with a gross margin of 77.9%78.0% and a net loss of $13.7$10.1 million, for the three months ended MarchJune 31,30, 2026 compared to revenue of $22.5$23.9 million, with a gross margin of 72.5%72.1% and a net loss of $14.4$15.2 million, for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, we generated revenue of $43.3 million, with a gross margin of 78.0% and a net loss of $23.7 million, compared to revenue of $46.4 million, with a gross margin of 72.3% and a net loss of $29.6 million, for the six months ended June 30, 2025. As of MarchJune 31,30, 2026, we had an accumulated deficit of $535.2$545.3 million, cash and cash equivalents of $61.6$55.8 million, and $37.3$37.5 million of outstanding term loans and credit agreements, net of debt discount and debt issuance costs.

We currently derive substantially all of our revenue from the sale of our products to hospitals and distributors. We market and sell our products through a direct sales organization in the United States and through direct sales and several third-party distributors in select markets outside the United States. We currently generate most of our revenue from the sales of Zephyr Valves and delivery catheters. We also generate a smaller amount of our revenue from our Chartis System, which is comprised of sales of the balloon catheters, usage fees and sales of the Chartis console, and from our LungTraX Platform, which is used to help identify patients potentially eligible for treatment with Zephyr Valves. No customer accounted for more than 10% of our revenue for the three months ended MarchJune 31,30, 2026.2026 Weand hadJune one customer that accounted for 10% of our revenue for the three months ended March 31,30, 2025.

Other (Expense) Income, Net

Other (expense) income, net primarily consists of foreign currency exchange gains and losses.losses and change in fair value of the Additional Warrants.

Comparison of the Three Months Ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025

Revenue decreased by $2.0$1.1 million, or 8.7%,4.6%, to $20.6$22.8 million for the three months ended MarchJune 31,30, 2026, compared to $22.5$23.9 million for the three months ended MarchJune 31,30, 2025. The sale of products in the United States decreased by $0.9$0.5 million to $13.3 million for the three months ended March 31, 2026, compared to $14.2 million for the three months ended MarchJune 31,30, 2026, compared to $14.7 million for the three months ended June 30, 2025. The sale of products in international markets decreased by $1.0$0.5 million to $7.3$8.6 million for the three months ended MarchJune 31,30, 2026, compared to $8.3$9.1 million for the three months ended MarchJune 31,30, 2025. The decrease in revenue in the United States was primarily attributable to a decrease in Zephyr Valve procedure volumes. The decrease in international revenue was primarily attributable to a lack of sales into China as we awaitawaited the renewal of our registration certificate. In June 2026, we secured the renewal of our Chinese registration certificate. We are focused on restarting commercial activity in the region for the remainder of this year and anticipate resuming shipments to our Chinese distributor by early next year.

Cost of goods sold decreased by $1.7$1.6 million, or 26.7%,24.7%, to $4.5$5.0 million for the three months ended MarchJune 31,30, 2026, compared to $6.2$6.7 million for the three months ended MarchJune 31,30, 2025. The decrease was mainly due to a decrease in the number of products sold and as a result decreased manufacturing costs. Gross margin increased by 5.4%5.9% to 77.9%78.0% for the three months ended MarchJune 31,30, 2026, compared to 72.5%72.1% for the three months ended MarchJune 31,30, 2025. The increase in gross margin was primarily due to changes in geographic mix during the three months ended MarchJune 31,30, 2026.

Research and development expenses increaseddecreased by $0.1$0.3 million, or 3.0%,5.1%, to $4.9$5.0 million for the three months ended MarchJune 31,30, 2026, compared to $4.8$5.3 million for the three months ended MarchJune 31,30, 2025. The increasedecrease in research and development expense was primarily due to ana increasedecrease of $0.2 million in payroll and personnel-related expenses, and a decrease of $0.3 million in testing and other expenses in support of product development, offset by an increase of $0.1$0.2 million in costs associated with our clinical trials, including fees paid to clinical research organizations, offset by a decrease of $0.2 million in testing and other expenses in support of product development.organizations.

Selling, general and administrative expenses decreased by $2.0$4.9 million, or 7.8%,18.5%, to $24.1$21.8 million for the three months ended MarchJune 31,30, 2026, compared to $26.1$26.7 million for the three months ended MarchJune 31,30, 2025. The decrease in selling, general and administrative expenses was primarily due to a decrease of $1.4 million in advertising and marketing related expenses, a decrease of $0.4 million in travel and conference related expenses, and a decrease of $0.2$2.5 million in payroll and personnel-related expenses for our sales, marketing and administrative personnel.personnel, a decrease of $1.4 million in advertising and marketing related expenses, a decrease of $0.8 million in consulting and other professional expenses, and a decrease of $0.2 million in travel and conference related expenses.

Interest expense increased by $0.2$0.4 million to $1.0$1.2 million for the three months ended MarchJune 31,30, 2026 compared to $0.8 million for the three months ended MarchJune 31,30, 2025, primarily due to higher interest rates under our Perceptive Loan compared to our CIBC Loan which was fully repaid in March 2026. Interest income decreased by $0.5$0.4 million to $0.4$0.3 million for the three months ended MarchJune 31,30, 2026 compared to $0.9$0.7 million for the three months ended MarchJune 31,30, 2025. The decrease was primarily due to a lower balance of cash, cash equivalents and marketable securities, which resulted in reduced returns on these assets.

Other (Expense) Income, Net

Other (expense) income, net was $0.1less than $(0.1) million for the three months ended MarchJune 31,30, 2026 and $0.2$(0.1) million for the three months ended MarchJune 31,30, 2025, primarily due to foreign currency exchange gains.

To date, we have financed our operations primarily through our initial public offering, private placements of equity securities, debt financing arrangements and sales of our products. As of MarchJune 31,30, 2026, we had cash and cash equivalents of $61.6$55.8 million, an accumulated deficit of $535.2$545.3 million, and $37.3$37.5 million outstanding under the Perceptive Agreement and Swiss COVID-19 Credit Agreement, net of debt discount and debt issuance costs.

On the Closing Date, we borrowed an initial loan under the Perceptive Agreement in an aggregate principal amount of $40.0 million (the “Perceptive Loan”). The Loan Facility permits us to borrow up to an additional $20.0 million, in two additional equal tranches (the “Additional Loan Draws”). The first $10.0 million Additional Loan Draw becomes available if we reach at least $92.5 million in revenue for any trailing twelve-month period ending as of the end of the last day of any fiscal quarter through, and including, the fiscal quarter ending September 30, 2027, and the second $10.0 million Additional Loan Draw becomes available if we reach at least $100.0 million in revenue for any trailing twelve-month period ending as of the end of the last day of any fiscal quarter through, and including, the fiscal quarter ending December 31, 2027.

On each interest payment date occurring on or prior to March 2, 2029, we have the option to pay interest as follows: 2.0% per annum paid-in-kind (“PIK”) by increasing the principal of the Perceptive Loan and the remaining interest payable paid in cash. For each payment date through MarchJune 31,30, 2026, we elected the PIK option, increasing the principal of the Perceptive Loan by $0.1$0.3 million.

The Perceptive Agreement contains certain representations and warranties, affirmative covenants, negative covenants, and events of default that are customarily required for similar financings. In addition, the Perceptive Agreement contains financial covenants requiring us to (i) at all times prior to the Maturity Date, maintain minimum unrestricted cash and certain types of marketable securities of at least $4.0 million and (ii) as of each calculation date set forth in the Perceptive Agreement, maintain our annual trailing consolidated revenue determined in accordance with U.S. GAAPGAAP, thattested ison nota lessquarterly thanbasis, starting from $85.0 million over a trailing 12-month period ending March 31, 2026, and increasing to $107.5 million for the amountstrailing specified12-month inperiod theending PerceptiveDecember Agreement.31, 2030. The occurrence of an event of default under the Perceptive Agreement could result in, among other things, the declaration that all outstanding principal and interest thereunder are immediately due and payable in whole or in part. As of June 30, 2026, we were in compliance with the covenants contained in the Perceptive Agreement.

As of MarchJune 31,30, 2026, the Perceptive Loan had an annual effective interest rate of 13.9% per year.

Interest expense on the Perceptive Loan was $0.4$1.2 million and $1.6 million during the three and six months ended MarchJune 31,30, 2026, respectively, including interest expense related to debt discount and debt issuance costs of the Perceptive Loan of less$0.1 thanmillion and $0.1 million.million, respectively.

In May 2020, Pulmonx International Sàrl, our wholly owned subsidiary, 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. The COVID-19 Credit Agreement currently 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. As of MarchJune 31,30, 2026, Pulmonx International Sàrl has repaid $0.40.4 million Swiss Francs to the lender.

Net cash used in operating activities was $13.2$15.3 million for the threesix months ended MarchJune 31,30, 2025.2026. Cash used in operating activities was primarily a result of the net loss of $14.4$23.7 million, an increase in inventory of $1.2 million mainly due to an increase in finished goods, a decrease in accrued liabilities of $4.9$0.4 million primarily due to payment of incentive compensation expense associated with the achievement of performance objectives, a decrease in lease liabilities of $0.6 million due to lease payments, and an increase in accounts receivable of $0.7$0.3 million due to the timing of payments from our customers, an increase in other assets of $0.4 million primarily due to capitalized implementation costs of a hosting arrangement, and amortization of premiums and discounts on marketable securities of $0.2 million.customers. This is partially offset by stock-based compensation expense of $5.6$7.8 million, non-cash lease expense of $0.8 million, an increase in accounts payable of $0.5$0.8 million due to timing of payments to our vendors, adepreciation decreaseand in inventory of $0.4 million due to shipment of products, non-cash leaseamortization expense of $0.4 million, a decrease in prepaid expenses and other current assets of $0.3$0.5 million primarily due to the timing of payments to our vendors, and depreciation$0.3 and amortization expensemillion of $0.3interest million.incurred but paid-in-kind.

Net cash used in investing activities in the threesix months ended MarchJune 31,30, 2026 was less than $0.1 million, consisting of purchases of property and equipment.

Net cash provided by investing activities in the threesix months ended MarchJune 31,30, 2025 was $16.3$21.8 million, consisting of proceeds from maturities of marketable securities of $20.5$27.8 million, offset by purchases of marketable securities of $3.9$5.7 million and purchases of property and equipment of $0.3$0.4 million.

Net cash provided by financing activities in the threesix months ended MarchJune 31,30, 2026 was $2.0$1.5 million, consisting of proceeds from our Perceptive Loan of $38.8 million, and proceeds from the issuance of common stock under the employee stock purchase plan of $0.2 million, partially offset by repayment of our CIBC Loan of $37.0 million.

Net cash provided by financing activities in the threesix months ended MarchJune 31,30, 2025 was $0.7$0.6 million, consisting of proceeds from the issuance of common stock under the employee stock purchase plan of $0.6 million and proceeds from the exercise of common stock options of $0.1 million, offset by repayment of debt under the Credit Agreement of less than $0.1 million and payment of debt issuance cost of less than $0.1 million.

Our net cash operating expenditures were $10.1$15.3 million in the threesix months ended MarchJune 31,30, 2026 and $13.2$17.1 million in the threesix months ended MarchJune 31,30, 2025. We intend to continue to make investments in the development of our products, including ongoing research and development programs. Our cash outflows for capital expenditures were less than $0.1 million and $0.3$0.4 million in the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively, and we expect to maintain the level of expenditures in the future to support our commercial infrastructure, sales force and other commercialization efforts. Recent and expected working and other capital requirements include amounts related to future lease payments for operating lease obligations, which totaled $28.9$28.2 million as of MarchJune 31,30, 2026, with $3.0 million expected to be paid within the next 12 months, and amounts related to future short-term and long-term debt which totaled $63.3$62.3 million, with $3.7 million expected to be paid within the next 12 months. Lastly, we may undertake additional expenses to further expand our commercial organization and efforts, enhance our research and development efforts and pursue product expansion opportunities.

As of MarchJune 31,30, 2026, we had cash and cash equivalents of $61.6$55.8 million. Based on our current planned operations, we expect that our cash and cash equivalents will enable us to fund our operating expenses for at least 12 months from the issuance of our condensed consolidated financial statements as of and for the threesix months ended MarchJune 31,30, 2026. We believe we will meet longer-term expected future cash requirements and obligations through a combination of available cash and cash equivalents, sales of our products, debt financings, and access to other public or private equity offerings. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 10, 2026, and the notes to the unaudited condensed consolidated financial statements included in “Part I, Item 1 — Financial Statements” of this Quarterly Report on Form 10-Q. During the threesix months ended MarchJune 31,30, 2026, except as described in Note 2 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, there were no material changes to our critical accounting estimates from those discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 10, 2026.