Description of Business	6 Months Ended
Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Description of Business	1. Description of Business Vapotherm, Inc. (the “Company”) is a global medical technology company primarily focused on the care of patients of all ages suffering from the respiratory distress often associated with complex lung diseases such as chronic obstructive pulmonary disease (“COPD”), congestive heart failure, pneumonia, asthma and COVID-19. The Company’s strategy is to become the world’s preeminent complex lung disease patient management company by combining digital, clinical and device solutions to create a healthcare ecosystem focused on improving the lives of complex lung disease patients while reducing the cost of their care. The Company’s device solutions are focused on High Velocity Nasal Insufflation (“HVNI”, or “High Velocity Therapy”), which delivers non-invasive ventilatory support to patients by providing heated, humidified, oxygenated air at high velocities through a small-bore nasal interface, and on closed loop control systems such as our Oxygen Assist Module (“OAM”), designed to automatically maintain a patient's pulse oxygen saturation (“SpO2”) levels within a specified range for a defined period of time. The Company’s digital solutions are focused on at home patient monitoring, using proprietary algorithms to predict impending respiratory episodes before they occur and coordinate timely intervention, obviating the need for costly hospital admissions and minimizing patient distress. The Company’s clinical solutions include affiliations with leading pulmonologists and other clinicians, offering both in person and virtual care, as well as its own call center staffed by experienced nurses. While these device, digital and clinical solutions function independently, the Company believes leveraging the three together can create a unique healthcare ecosystem, focused on delivering high quality, efficient respiratory care. High Velocity Therapy is an advanced form of high flow therapy that is differentiated due to its ability to deliver breathing gases, including oxygen, at a high velocity, for the treatment of spontaneously breathing patients with either Type 1 hypoxic respiratory distress, like that experienced by patients with pneumonia or COVID-19, or Type 2 hypercapnic respiratory distress, like that experienced by patients with COPD. The Company’s Precision Flow systems, which use High Velocity Therapy technology, are clinically validated alternatives to, and address many limitations of, the current standard of care for the treatment of respiratory distress in a hospital setting. The Company’s next generation High Velocity Therapy system, known as HVT 2.0, received 510k clearance from the FDA in 2021, was in limited market release as of June 30, 2022 and in full market release as of August 2022. The HVT 2.0 platform is approved for therapy in multiple settings of care, including the home. In certain countries outside the United States, the Company currently offers its OAM, which launched in the United Kingdom, select European markets, and Israel in late 2020. The OAM can be used with most versions of the Company’s Precision Flow system and the HVT 2.0 has been enabled for future OAM use. The OAM helps clinicians maintain a patient’s SpO2 within a target SpO2 range over a greater period of time while requiring significantly fewer manual adjustments to the equipment. Maintenance of the prescribed oxygen saturation range may reduce the health risks associated with dosing too much, or too little, oxygen, particularly in neonates. In neonates, these risks include visual or developmental impairment or death. The Company sells its Precision Flow systems to hospitals through a direct sales organization in the United States, the United Kingdom and Germany and through distributors in other select countries outside of those countries. The OAM is sold through a direct sales organization in the United Kingdom and Germany and through distributors in Europe and the Middle East. The Company is in the process of seeking FDA approval to market the OAM in the United States. In addition, the Company employs field-based clinical educators who focus on medical education and training in the effective use of its products and help facilitate increased adoption and utilization. The Company focuses on physicians, respiratory therapists and nurses who work in acute hospital settings, including emergency departments and adult, pediatric and neonatal intensive care units. The Company’s relationship with these clinicians is particularly important, as it enables the Company’s products to follow patients through the care continuum. On November 2, 2021, HGE Health Care Solutions, LLC (“HGE”), a wholly owned subsidiary of the Company, affiliated with a leading pulmonology practice in Tulsa, Oklahoma known as Pulmonary Care Innovations, PLLC d/b/a RespirCare (“RespirCare”). RespirCare provides in-person and virtual care to COPD and other respiratory distress patients in Oklahoma (and potentially other states with licensure reciprocity). This affiliation was structured as an acquisition of RespirCare’s management company, PCI Management Group LLC (“PCI”) and PCI’s arrangements with RespirCare and its physician shareholder. The Company consolidates PCI and RespirCare for accounting and tax purposes. See Note 3 “Business Combinations” to these condensed consolidated financial statements for details of this transaction. The Company had an accumulated deficit of $442.4 million as of June 30, 2022. The Company expects to continue to incur significant product development, regulatory, sales and marketing and other expenses. The Company has historically funded its cash flow deficits primarily through the issuance of equity securities and debt and sales of Precision Flow systems and their associated disposables. As of June 30, 2022, the Company had cash, cash equivalents and restricted cash of $51.0 million, working capital of $80.8 million and outstanding debt under its Loan and Security Agreement (the “SLR Loan Agreement”) with SLR Investment Corp. (“SLR”) of $100.0 million. The SLR Loan Agreement provides for interest-only payments through February 18, 2026. The SLR Loan Agreement contains customary covenants and representations, including, without limitation, a minimum revenue covenant equal to 75% of each month’s forecasted net product revenue (tested on a trailing six-month basis at the end of each fiscal month, commencing with the six-month period ending on July 31, 2022). On August 1, 2022, SLR provided the Company with a one-month extension of the covenant-free period through August 31, 2022, while the Company is in active discussions with SLR regarding a modification of the minimum revenue covenant. Accordingly, the Company’s first measurement date for the minimum revenue covenant will be August 31, 2022, on a trailing six-month basis. The Company anticipates that it will be able to obtain a modification of the minimum revenue covenant before the first reporting period, although no assurance can be provided that it will be able to do so. If the Company is not able to achieve its minimum revenue covenant for any reporting period and an event of default were to occur under the SLR Loan Agreement, SLR is entitled to take enforcement action, including an incremental 5% interest rate increase or acceleration of amounts due under the SLR Loan Agreement. Absent an event of default under the SLR Loan Agreement and SLR exercising its right to accelerate amounts due under the SLR Loan Agreement, the Company anticipates that its existing cash, cash equivalents and restricted cash and working capital will be sufficient to meet the Company’s capital requirements for at least the next 12 months from the date of the filing of this report on August 3, 2022. However, as the Company continues to incur losses and cash flow deficits, its transition to profitability is dependent upon achieving a level of revenues adequate to support its cost structure and reducing its cash operating expenses and capital expenditures to pre-COVID levels. As such, the Company has evaluated whether or not its cash, cash equivalents and restricted cash on hand and working capital would be sufficient to sustain projected operating activities through August 3, 2023, as required by Accounting Standards Codification (ASC) 205-40 Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. Based on the Company’s current forecasts of annual cash flow deficits, the Company expects to be able to reach profitability with its existing resources and non-dilutive financing sources, although no assurance can be provided that it will do so. Due to the inherent uncertainty in predicting future revenues and certain variable costs, management has considered its ability to reduce cash flow deficits and is in the process of implementing the following steps to reduce its cash flow deficits: • Move all of the Company’s production operations to Mexico to help reduce cost of labor and overhead; • Establish a Technology Center in Singapore to bring most research and development projects in-house to help reduce the cost of external design firms and access government grant funding; • Materially defer or limit the Company’s spending on capital equipment; • Normalize the level of commission payouts to match current sales levels; • Reduce the use of external consultants and contract resources; and • Other steps to be communicated in the future. Management believes its plans to reduce cash flow deficits can be effectively implemented as all of the actions are within the Company’s control. If, however, the Company’s minimum revenue covenant modification request does not receive the consent of SLR, and there is an event of default under the SLR Loan Agreement and SLR exercises its right to accelerate amounts due under the SLR Loan Agreement, then this condition would raise substantial doubt about the Company’s ability to continue as a going concern. The Company anticipates that it will be able to obtain the requested minimum revenue covenant modification prior to its next minimum revenue covenant measurement date, although no assurance can be provided that it will be able to do so.

Description of Business

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

1. Description of Business

Vapotherm, Inc. (the “Company”) is a global medical technology company primarily focused on the care of patients of all ages suffering from the respiratory distress often associated with complex lung diseases such as chronic obstructive pulmonary disease (“COPD”), congestive heart failure, pneumonia, asthma and COVID-19. The Company’s strategy is to become the world’s preeminent complex lung disease patient management company by combining digital, clinical and device solutions to create a healthcare ecosystem focused on improving the lives of complex lung disease patients while reducing the cost of their care. The Company’s device solutions are focused on High Velocity Nasal Insufflation (“HVNI”, or “High Velocity Therapy”), which delivers non-invasive ventilatory support to patients by providing heated, humidified, oxygenated air at high velocities through a small-bore nasal interface, and on closed loop control systems such as our Oxygen Assist Module (“OAM”), designed to automatically maintain a patient's pulse oxygen saturation (“SpO2”) levels within a specified range for a defined period of time. The Company’s digital solutions are focused on at home patient monitoring, using proprietary algorithms to predict impending respiratory episodes before they occur and coordinate timely intervention, obviating the need for costly hospital admissions and minimizing patient distress. The Company’s clinical solutions include affiliations with leading pulmonologists and other clinicians, offering both in person and virtual care, as well as its own call center staffed by experienced nurses. While these device, digital and clinical solutions function independently, the Company believes leveraging the three together can create a unique healthcare ecosystem, focused on delivering high quality, efficient respiratory care.

High Velocity Therapy is an advanced form of high flow therapy that is differentiated due to its ability to deliver breathing gases, including oxygen, at a high velocity, for the treatment of spontaneously breathing patients with either Type 1 hypoxic respiratory distress, like that experienced by patients with pneumonia or COVID-19, or Type 2 hypercapnic respiratory distress, like that experienced by patients with COPD. The Company’s Precision Flow systems, which use High Velocity Therapy technology, are clinically validated alternatives to, and address many limitations of, the current standard of care for the treatment of respiratory distress in a hospital setting. The Company’s next generation High Velocity Therapy system, known as HVT 2.0, received 510k clearance from the FDA in 2021, was in limited market release as of June 30, 2022 and in full market release as of August 2022. The HVT 2.0 platform is approved for therapy in multiple settings of care, including the home.

In certain countries outside the United States, the Company currently offers its OAM, which launched in the United Kingdom, select European markets, and Israel in late 2020. The OAM can be used with most versions of the Company’s Precision Flow system and the HVT 2.0 has been enabled for future OAM use. The OAM helps clinicians maintain a patient’s SpO2 within a target SpO2 range over a greater period of time while requiring significantly fewer manual adjustments to the equipment. Maintenance of the prescribed oxygen saturation range may reduce the health risks associated with dosing too much, or too little, oxygen, particularly in neonates. In neonates, these risks include visual or developmental impairment or death.

The Company sells its Precision Flow systems to hospitals through a direct sales organization in the United States, the United Kingdom and Germany and through distributors in other select countries outside of those countries. The OAM is sold through a direct sales organization in the United Kingdom and Germany and through distributors in Europe and the Middle East. The Company is in the process of seeking FDA approval to market the OAM in the United States. In addition, the Company employs field-based clinical educators who focus on medical education and training in the effective use of its products and help facilitate increased adoption and utilization. The Company focuses on physicians, respiratory therapists and nurses who work in acute hospital settings, including emergency departments and adult, pediatric and neonatal intensive care units. The Company’s relationship with these clinicians is particularly important, as it enables the Company’s products to follow patients through the care continuum.

On November 2, 2021, HGE Health Care Solutions, LLC (“HGE”), a wholly owned subsidiary of the Company, affiliated with a leading pulmonology practice in Tulsa, Oklahoma known as Pulmonary Care Innovations, PLLC d/b/a RespirCare (“RespirCare”). RespirCare provides in-person and virtual care to COPD and other respiratory distress patients in Oklahoma (and potentially other states with licensure reciprocity). This affiliation was structured as an acquisition of RespirCare’s management company, PCI Management Group LLC (“PCI”) and PCI’s arrangements with RespirCare and its physician shareholder. The Company consolidates PCI and RespirCare for accounting and tax purposes. See Note 3 “Business Combinations” to these condensed consolidated financial statements for details of this transaction.

The Company had an accumulated deficit of $442.4 million as of June 30, 2022. The Company expects to continue to incur significant product development, regulatory, sales and marketing and other expenses. The Company has historically funded its cash flow deficits primarily through the issuance of equity securities and debt and sales of Precision Flow systems and their associated disposables. As of June 30, 2022, the Company had cash, cash equivalents and restricted cash of $51.0 million, working capital of $80.8 million and outstanding debt under its Loan and Security Agreement (the “SLR Loan Agreement”) with SLR Investment Corp. (“SLR”) of $100.0 million. The SLR Loan Agreement provides for interest-only payments through February 18, 2026. The SLR Loan Agreement contains customary covenants and representations, including, without limitation, a minimum revenue covenant equal to 75% of each month’s forecasted net product revenue (tested on a trailing six-month basis at the end of each fiscal month, commencing with the six-month period ending on July 31, 2022). On August 1, 2022, SLR provided the Company with a one-month extension of the covenant-free period through August 31, 2022, while the Company is in active discussions with SLR regarding a modification of the minimum revenue covenant. Accordingly, the Company’s first measurement date for the minimum revenue covenant will be August 31, 2022, on a trailing six-month basis. The Company anticipates that it will be able to obtain a modification of the minimum revenue covenant before the first reporting period, although no assurance can be provided that it will be able to do so. If the Company is not able to achieve its minimum revenue covenant for any reporting period and an event of default were to occur under the SLR Loan Agreement, SLR is entitled to take enforcement action, including an incremental 5% interest rate increase or acceleration of amounts due under the SLR Loan Agreement. Absent an event of default under the SLR Loan Agreement and SLR exercising its right to accelerate amounts due under the SLR Loan Agreement, the Company anticipates that its existing cash, cash equivalents and restricted cash and working capital will be sufficient to meet the Company’s capital requirements for at least the next 12 months from the date of the filing of this report on August 3, 2022. However, as the Company continues to incur losses and cash flow deficits, its transition to profitability is dependent upon achieving a level of revenues adequate to support its cost structure and reducing its cash operating expenses and capital expenditures to pre-COVID levels.

As such, the Company has evaluated whether or not its cash, cash equivalents and restricted cash on hand and working capital would be sufficient to sustain projected operating activities through August 3, 2023, as required by Accounting Standards Codification (ASC) 205-40 Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. Based on the Company’s current forecasts of annual cash flow deficits, the Company expects to be able to reach profitability with its existing resources and non-dilutive financing sources, although no assurance can be provided that it will do so.

Due to the inherent uncertainty in predicting future revenues and certain variable costs, management has considered its ability to reduce cash flow deficits and is in the process of implementing the following steps to reduce its cash flow deficits:

•

Move all of the Company’s production operations to Mexico to help reduce cost of labor and overhead;

•

Establish a Technology Center in Singapore to bring most research and development projects in-house to help reduce the cost of external design firms and access government grant funding;

•

Materially defer or limit the Company’s spending on capital equipment;

•

Normalize the level of commission payouts to match current sales levels;

•

Reduce the use of external consultants and contract resources; and

•

Other steps to be communicated in the future.

Management believes its plans to reduce cash flow deficits can be effectively implemented as all of the actions are within the Company’s control. If, however, the Company’s minimum revenue covenant modification request does not receive the consent of SLR, and there is an event of default under the SLR Loan Agreement and SLR exercises its right to accelerate amounts due under the SLR Loan Agreement, then this condition would raise substantial doubt about the Company’s ability to continue as a going concern. The Company anticipates that it will be able to obtain the requested minimum revenue covenant modification prior to its next minimum revenue covenant measurement date, although no assurance can be provided that it will be able to do so.