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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

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: 001-38740

Vapotherm, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

46-2259298

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

100 Domain Drive

 

Exeter, N.H.

(Address of principal executive offices)

03833

(Zip Code)

 

(603) 658-0011

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

VAPO

New York Stock Exchange

 

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 such 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 August 3, 2023, there were 49,071,682 outstanding shares of common stock of Vapotherm, Inc.

 

 


 

VAPOTHERM, INC.

FORM 10-Q

For the Quarterly Period Ended June 30, 2023

 

TABLE OF CONTENTS

 

Page No.

Note Regarding Forward-Looking Statements

3

PART I. FINANCIAL INFORMATION

Item 1

Financial Statements (interim periods unaudited)

5

Condensed Consolidated Balance Sheets – June 30, 2023 and December 31, 2022

5

Condensed Consolidated Statements of Comprehensive Loss – Three and Six Months ended June 30, 2023 and 2022

6

Condensed Consolidated Statements of Stockholders’ Deficit – Three and Six Months ended June 30, 2023 and 2022

7

Condensed Consolidated Statements of Cash Flows – Six Months ended June 30, 2023 and 2022

9

Notes to Condensed Consolidated Financial Statements

10

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

Item 3

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4

Controls and Procedures

46

 

PART II. OTHER INFORMATION

Item 1

Legal Proceedings

47

Item 1A

Risk Factors

47

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 6

Exhibits

50

Exhibit Index

50

Signatures

51

__________________

We use “Vapotherm,” “High Velocity Therapy,” “HVT,” “HVT 2.0,” “Precision Flow,” “Hi-VNI,” “OAM,” “Vapotherm UK,” “Vapotherm Access,” and other marks as trademarks in the United States and/or in other countries. This Quarterly Report on Form 10-Q contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

Unless otherwise indicated, information contained in this Quarterly Report on Form 10-Q concerning our industry and the markets in which we operate, including our general expectations, market position and market opportunity, is based on our management’s estimates and research, as well as industry and general publications and research, surveys and studies conducted by third parties. We believe that the information from these third-party publications, research, surveys and studies included in this Quarterly Report on Form 10-Q is reliable. Management’s estimates are derived from publicly available information, their knowledge of our industry and their assumptions based on such information and knowledge, which we believe to be reasonable. This data involves a number of assumptions and limitations which are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023 and in our other subsequent filings with the SEC, including this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023.

Unless the context requires otherwise, references to “Vapotherm,” the “Company,” “we,” “us,” and “our,” refer to Vapotherm, Inc. and our consolidated subsidiaries.

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “would,” “could,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” and the negative of these terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words and the use of future dates. Forward-looking statements include, but are not limited to, statements concerning:

estimates regarding the annual total addressable market for our High Velocity Therapy systems and other products and services, future results of operations, including restructuring charges, financial position, capital requirements and our needs for additional financing;
commercial success and market acceptance of our High Velocity Therapy systems, our Oxygen Assist Module, our digital solutions, and any future products we may seek to commercialize;
our ability to enhance our High Velocity Therapy technology, our Oxygen Assist Module, and our digital solutions to expand our indications and to develop and commercialize additional products and services, which next-generation products typically have higher average sale prices;
our business model and strategic plans for our products, technologies and business, including our implementation thereof;
the anticipated favorable effect of our recent transition of substantially all manufacturing operations to Mexico on our gross margins and costs and risks in connection therewith and risks associated with operations in Mexico;
the success of our current “path to profitability” goals for 2023, our strategy to grow existing customer accounts through education of our customers on the full capabilities of our technology, and our ability to return to historical disposable utilization or turn rates, increase our inventory turnover and reduce our inventory levels;
the impact of COVID-19 and labor and hospital staffing shortages on our business and operating results;
our ability to accurately forecast customer demand for our products, adjust our production capacity if necessary and manage our inventory, particularly in light of COVID-19, current global supply chain disruptions, the effect of inflation, rising interest rates and other recessionary indicators;
our ability to manage and maintain our direct sales and marketing organizations in the United States, the United Kingdom, Germany, Belgium and Spain and any other jurisdictions in which we elect to pursue a direct sales model, and to market and sell our High Velocity Therapy systems globally and to market and sell our Oxygen Assist Module in the United States and throughout the world;
our ability to hire and retain our senior management and other highly qualified personnel;
our ability to comply with the terms and covenants of our amended credit facility;
our need for additional financing in the future despite our recent February 2023 private placement;
the volatility of the trading price of our common stock and our ability to maintain our listing on the New York Stock Exchange (the “NYSE”), including regaining compliance with the NYSE continued listing standards;
our ability to commercialize or obtain regulatory approvals for our products, the timing or likelihood of regulatory filings and approvals, or the effect of delays in commercializing or obtaining regulatory approvals;
U.S. Food and Drug Administration (“FDA”) or other United States or foreign regulatory actions affecting us or the healthcare industry generally, including healthcare reform measures in the United States and international markets;
our ability to establish, maintain, and use our intellectual property to protect our High Velocity Therapy technology, Oxygen Assist Module, and digital solutions, and to prevent infringement of our intellectual property and avoid third party infringement claims; and

3


 

our expectations about market trends and their anticipated effect on our business and operating results.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. 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 those described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on February 23, 2023 and in our other subsequent filings with the SEC, including this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. Any forward-looking statements made herein speak only as of the date of this Quarterly Report on Form 10-Q, and you should not rely on forward-looking statements as predictions of future events. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

4


 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

VAPOTHERM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,000

 

 

$

15,738

 

Accounts receivable, net of expected credit losses
   of $
193 and $227, respectively

 

 

8,918

 

 

 

9,102

 

Inventories, net

 

 

25,144

 

 

 

32,980

 

Prepaid expenses and other current assets

 

 

4,518

 

 

 

2,081

 

Total current assets

 

 

56,580

 

 

 

59,901

 

Property and equipment, net

 

 

24,444

 

 

 

26,636

 

Operating lease right-of-use assets

 

 

4,673

 

 

 

5,805

 

Restricted cash

 

 

1,109

 

 

 

1,109

 

Goodwill

 

 

562

 

 

 

536

 

Deferred income tax assets

 

 

128

 

 

 

96

 

Other long-term assets

 

 

2,588

 

 

 

2,112

 

Total assets

 

$

90,084

 

 

$

96,195

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

2,160

 

 

$

2,739

 

Contract liabilities

 

 

1,301

 

 

 

1,216

 

Accrued expenses and other current liabilities

 

 

11,661

 

 

 

15,609

 

Total current liabilities

 

 

15,122

 

 

 

19,564

 

Long-term loans payable, net

 

 

101,820

 

 

 

96,994

 

Other long-term liabilities

 

 

7,598

 

 

 

7,827

 

Total liabilities

 

 

124,540

 

 

 

124,385

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

Preferred stock ($0.001 par value) 25,000,000 shares authorized; no shares
   issued and outstanding as of June 30, 2023 and December 31, 2022

 

 

-

 

 

 

-

 

Common stock ($0.001 par value) 175,000,000 shares authorized as of
   June 30, 2023 and December 31, 2022,
49,047,502 and 28,516,047
   shares issued and outstanding as of June 30, 2023 and
   December 31, 2022, respectively

 

 

49

 

 

 

29

 

Additional paid-in capital

 

 

488,419

 

 

 

461,940

 

Accumulated other comprehensive loss

 

 

(44

)

 

 

(157

)

Accumulated deficit

 

 

(522,880

)

 

 

(490,002

)

Total stockholders’ deficit

 

 

(34,456

)

 

 

(28,190

)

Total liabilities and stockholders’ deficit

 

$

90,084

 

 

$

96,195

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

Vapotherm, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenue

 

$

16,037

 

 

$

12,971

 

 

$

33,768

 

 

$

34,593

 

Cost of revenue

 

 

9,177

 

 

 

10,606

 

 

 

20,696

 

 

 

24,336

 

Gross profit

 

 

6,860

 

 

 

2,365

 

 

 

13,072

 

 

 

10,257

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,723

 

 

 

6,310

 

 

 

7,710

 

 

 

11,859

 

Sales and marketing

 

 

8,276

 

 

 

11,833

 

 

 

17,868

 

 

 

25,155

 

General and administrative

 

 

5,019

 

 

 

5,323

 

 

 

10,789

 

 

 

14,277

 

Impairment of goodwill

 

 

-

 

 

 

14,701

 

 

 

-

 

 

 

14,701

 

Impairment of long-lived and intangible assets

 

 

-

 

 

 

4,036

 

 

 

432

 

 

 

4,036

 

(Gain) loss on disposal of property and equipment

 

 

(2

)

 

 

-

 

 

 

53

 

 

 

-

 

Total operating expenses

 

 

17,016

 

 

 

42,203

 

 

 

36,852

 

 

 

70,028

 

Loss from operations

 

 

(10,156

)

 

 

(39,838

)

 

 

(23,780

)

 

 

(59,771

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(4,642

)

 

 

(2,849

)

 

 

(8,973

)

 

 

(4,596

)

Interest income

 

 

26

 

 

 

40

 

 

 

54

 

 

 

57

 

Foreign currency gain (loss)

 

 

9

 

 

 

(46

)

 

 

(145

)

 

 

(115

)

Loss on extinguishment of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,114

)

Net loss before income taxes

 

$

(14,763

)

 

$

(42,693

)

 

$

(32,844

)

 

$

(65,539

)

Provision (benefit) for income taxes

 

 

25

 

 

 

(10

)

 

 

34

 

 

 

82

 

Net loss

 

$

(14,788

)

 

$

(42,683

)

 

$

(32,878

)

 

$

(65,621

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(22

)

 

 

(185

)

 

 

113

 

 

 

(240

)

Total other comprehensive (loss) income

 

$

(22

)

 

$

(185

)

 

$

113

 

 

$

(240

)

Total comprehensive loss

 

$

(14,810

)

 

$

(42,868

)

 

$

(32,765

)

 

$

(65,861

)

Net loss per share - basic and diluted

 

$

(0.29

)

 

$

(1.61

)

 

$

(0.72

)

 

$

(2.48

)

Weighted-average number of shares used in calculating net
   loss per share, basic and diluted

 

 

50,625,778

 

 

 

26,574,027

 

 

 

45,644,863

 

 

 

26,448,257

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

VAPOTHERM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

(In thousands, except share amounts)

 

 

 

 

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2022

 

 

28,516,047

 

 

$

29

 

 

$

461,940

 

 

$

(157

)

 

$

(490,002

)

 

$

(28,190

)

Issuance of common stock and pre-funded warrants
   and accompanying warrants in private placement, net

 

 

17,502,244

 

 

 

17

 

 

 

20,926

 

 

 

-

 

 

 

-

 

 

 

20,943

 

Issuance of common stock upon exercise of options

 

 

228

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock with restricted stock units

 

 

175,732

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock for services

 

 

21,687

 

 

 

-

 

 

 

59

 

 

 

-

 

 

 

-

 

 

 

59

 

Issuance of common stock warrants

 

 

-

 

 

 

-

 

 

 

28

 

 

 

-

 

 

 

-

 

 

 

28

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

2,761

 

 

 

-

 

 

 

-

 

 

 

2,761

 

Foreign currency translation adjustments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

135

 

 

 

-

 

 

 

135

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(18,090

)

 

 

(18,090

)

Balance at March 31, 2023

 

 

46,215,938

 

 

$

46

 

 

$

485,714

 

 

$

(22

)

 

$

(508,092

)

 

$

(22,354

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise of pre-funded
   warrants

 

 

2,592,121

 

 

 

3

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3

 

Issuance of common stock with restricted stock units

 

 

11,844

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock under the Employee Stock
   Purchase Plan

 

 

204,099

 

 

 

-

 

 

 

77

 

 

 

-

 

 

 

-

 

 

 

77

 

Issuance of common stock for services

 

 

23,500

 

 

 

-

 

 

 

58

 

 

 

-

 

 

 

-

 

 

 

58

 

Issuance of common stock warrants

 

 

-

 

 

 

-

 

 

 

43

 

 

 

-

 

 

 

-

 

 

 

43

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

2,527

 

 

 

-

 

 

 

-

 

 

 

2,527

 

Foreign currency translation adjustments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22

)

 

 

-

 

 

 

(22

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,788

)

 

 

(14,788

)

Balance at June 30, 2023

 

 

49,047,502

 

 

$

49

 

 

$

488,419

 

 

$

(44

)

 

$

(522,880

)

 

$

(34,456

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


 

VAPOTHERM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share amounts)

 

 

 

 

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

26,126,253

 

 

$

26

 

 

$

443,358

 

 

$

26

 

 

$

(376,743

)

 

$

66,667

 

Issuance of common stock upon exercise of options

 

 

1,227

 

 

 

-

 

 

 

12

 

 

 

-

 

 

 

-

 

 

 

12

 

Issuance of common stock with restricted stock units
   and awards

 

 

60,488

 

 

 

-

 

 

 

10

 

 

 

-

 

 

 

-

 

 

 

10

 

Issuance of common stock for services

 

 

3,683

 

 

 

-

 

 

 

76

 

 

 

-

 

 

 

-

 

 

 

76

 

Issuance of common stock to satisfy contingent
   and consideration

 

 

368,168

 

 

 

1

 

 

 

5,629

 

 

 

-

 

 

 

-

 

 

 

5,630

 

Issuance of common stock warrants

 

 

-

 

 

 

-

 

 

 

1,157

 

 

 

-

 

 

 

-

 

 

 

1,157

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

3,370

 

 

 

-

 

 

 

-

 

 

 

3,370

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(55

)

 

 

-

 

 

 

(55

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22,938

)

 

 

(22,938

)

Balance at March 31, 2022

 

 

26,559,819

 

 

$

27

 

 

$

453,612

 

 

$

(29

)