10-Q

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 March 31, 2024

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
N/A	N/A	N/A

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 May 2, 2024, there were 6,215,192 outstanding shares of common stock of Vapotherm, Inc.

VAPOTHERM, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2024

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 – March 31, 2024 and December 31, 2023	5
	Condensed Consolidated Statements of Comprehensive Loss – Three Months ended March 31, 2024 and 2023	6
	Condensed Consolidated Statements of Stockholders’ Deficit – Three Months ended March 31, 2024 and 2023	7
	Condensed Consolidated Statements of Cash Flows – Three Months ended March 31, 2024 and 2023	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4	Controls and Procedures	38
PART II. OTHER INFORMATION
Item 1	Legal Proceedings	39
Item 1A	Risk Factors	39
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6	Exhibits	40
Exhibit Index
Signatures		41

__________________

We use “Vapotherm,” “High Velocity Therapy,” “HVT,” “HVT 2.0,” “Precision Flow,” “Hi-VNI,” “OAM,” “Vapotherm UK,” “Vapotherm Access,” “Access365,” 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, 2023 as filed with the Securities and Exchange Commission (“SEC”) on February 22, 2024 and in our other subsequent filings with the SEC, including this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024.

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

On August 18, 2023, we effected a 1:8 reverse stock split for each share of common stock issued and outstanding. All shares and associated amounts in this report have been retroactively restated to reflect the stock split.

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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 selling prices;

•our business model and strategic plans for our products, technologies and business, including our implementation thereof;

•the anticipated favorable effect of our 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 anticipated launch of our Access365 home ventilation solution in 2025 and the anticipated receipt of 510(k) from the U.S. Food and Drug Administration (“FDA”) in 2025;

•the success of our current “path to profitability” goals, 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 continuing 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, 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 and ability to obtain additional financing and our ability to continue as a going concern;

•the volatility of the trading price of our common stock and our ability to maintain an active trading market in our common stock, especially in light of the trading of our common stock on the OTCQX tier of the OTC Markets;

•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;

•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;

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•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

•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, 2023 as filed with the SEC on February 22, 2024 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.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VAPOTHERM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	March 31, 2024			December 31, 2023
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	3,304		$	9,725
Accounts receivable, net of expected credit losses    of $229 and $160, respectively		10,203			10,672
Inventories, net		24,063			22,968
Prepaid expenses and other current assets		3,844			3,058
Total current assets		41,414			46,423
Property and equipment, net		23,313			23,703
Operating lease right-of-use assets		3,136			3,372
Restricted cash		1,109			1,109
Goodwill		560			565
Deferred income tax assets		55			57
Other long-term assets		2,320			2,388
Total assets	$	71,907		$	77,617
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	4,301		$	5,053
Contract liabilities		1,361			1,237
Accrued expenses and other current liabilities		20,531			12,805
Current portion of loans payable, net		111,670			-
Total current liabilities		137,863			19,095
Long-term loans payable, net		-			107,059
Other long-term liabilities		2,525			6,797
Total liabilities		140,388			132,951
Commitments and contingencies (Note 8)
Stockholders’ deficit
Preferred stock ($0.001 par value) 25,000,000 shares authorized; no shares    issued and outstanding as of March 31, 2024 and December 31, 2023		-			-
Common stock ($0.001 par value) 21,875,000 shares authorized as of    March 31, 2024 and December 31, 2023, 6,216,349 and 6,165,806    shares issued and outstanding as of March 31, 2024 and    December 31, 2023, respectively		6			6
Additional paid-in capital		494,615			492,764
Accumulated other comprehensive (loss) income		(71	)		91
Accumulated deficit		(563,031	)		(548,195	)
Total stockholders’ deficit		(68,481	)		(55,334	)
Total liabilities and stockholders’ deficit	$	71,907		$	77,617

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 March 31,
	2024			2023
Net revenue	$	19,134		$	17,731
Cost of revenue		9,477			11,519
Gross profit		9,657			6,212
Operating expenses
Research and development		3,632			3,987
Sales and marketing		7,142			9,592
General and administrative		4,472			5,770
Impairment of right-of-use assets		-			432
(Gain) loss on disposal of property and equipment		(8	)		55
Total operating expenses		15,238			19,836
Loss from operations		(5,581	)		(13,624	)
Other (expense) income
Interest expense		(9,253	)		(4,331	)
Interest income		5			28
Foreign currency gain (loss)		4			(154	)
Net loss before income taxes	$	(14,825	)	$	(18,081	)
Provision for income taxes		11			9
Net loss	$	(14,836	)	$	(18,090	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(162	)		135
Total other comprehensive (loss) income	$	(162	)	$	135
Total comprehensive loss	$	(14,998	)	$	(17,955	)
Net loss per share - basic and diluted	$	(2.31	)	$	(3.56	)
Weighted-average number of shares used in calculating net    loss per share, basic and diluted (1)		6,430,502			5,076,075

(1) On August 18, 2023, the Company effected a 1:8 reverse stock split for each share of common stock issued

and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock split.

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

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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		Income (Loss)			Deficit			Deficit
Balance at December 31, 2022		3,564,505	$	4	$	461,965	$	(157	)	$	(490,002	)	$	(28,190	)
Issuance of common stock and pre-funded warrants    and accompanying warrants in private placement, net		2,187,781		2		20,941		-			-			20,943
Issuance of common stock upon exercise of options		28		-		-		-			-			-
Issuance of common stock upon settlement of    restricted stock units		21,967		-		-		-			-			-
Issuance of common stock for services		2,711		-		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		5,776,992	$	6	$	485,754	$	(22	)	$	(508,092	)	$	(22,354	)
Balance at December 31, 2023		6,165,806	$	6	$	492,764	$	91		$	(548,195	)	$	(55,334	)
Issuance of common stock upon exercise of options		1,339		-		1		-			-			1
Issuance of common stock upon settlement of    restricted stock units		37,818		-		-		-			-			-
Issuance of common stock for services		11,386		-		20		-			-			20
Issuance of common stock warrants		-		-		16		-			-			16
Stock-based compensation expense		-		-		1,814		-			-			1,814
Foreign currency translation adjustments		-		-		-		(162	)		-			(162	)
Net loss		-		-		-		-			(14,836	)		(14,836	)
Balance at March 31, 2024		6,216,349	$	6	$	494,615	$	(71	)	$	(563,031	)	$	(68,481	)

(1) On August 18, 2023, the Company effected a 1:8 reverse stock split for each share of common stock issued

and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock split.

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

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VAPOTHERM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities
Net loss	$	(14,836	)	$	(18,090	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense		1,834			2,820
Depreciation and amortization		1,306			1,248
Provision for credit losses		69			49
Provision for inventory valuation		-			165
Non-cash lease expense		235			387
Impairment of right-of-use assets		-			432
(Gain) loss on disposal of property and equipment		(8	)		55
Placed units reserve		76			344
Interest paid in-kind		2,527			2,194
Non-cash interest expense		4,931			620
Amortization of discount on debt		184			184
Deferred income taxes		11			9
Changes in operating assets and liabilities:
Accounts receivable		389			663
Inventories		(1,112	)		4,384
Prepaid expenses and other assets		(467	)		(1,234	)
Accounts payable		(561	)		114
Contract liabilities		124			(25	)
Accrued expenses and other current liabilities		(618	)		(3,768	)
Operating lease liabilities, current and long-term		(641	)		(585	)
Net cash used in operating activities		(6,557	)		(10,034	)
Cash flows from investing activities
Purchases of property and equipment		(1,410	)		(1,004	)
Net cash used in investing activities		(1,410	)		(1,004	)
Cash flows from financing activities
Proceeds from issuance of common stock and pre-funded warrants and    accompanying warrants in private placement, net of issuance costs		-			20,943
Proceeds from loans, net of discount		1,920			-
Payment of deferred financing costs		(250	)		-
Proceeds from exercise of stock options		1			-
Net cash provided by financing activities		1,671			20,943
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(125	)		70
Net (decrease) increase in cash, cash equivalents and restricted cash		(6,421	)		9,975
Cash, cash equivalents and restricted cash
Beginning of period		10,834			16,847
End of period	$	4,413		$	26,822
Supplemental disclosures of cash flow information
Interest paid during the period	$	1,613		$	1,284
Property and equipment purchases in accounts payable and accrued expenses	$	369		$	354
Issuance of common stock warrants in conjunction with long term debt	$	16		$	28
Issuance of common stock for services	$	20		$	59

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

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VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

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 respiratory distress, whether associated with complex lung diseases such as chronic obstructive pulmonary disease (“COPD”), congestive heart failure, pneumonia, asthma and COVID-19 or other systemic conditions. The Company’s mission is to improve the lives of patients suffering from complex lung disease and other forms of respiratory distress while reducing the cost of their care through integrated device and digital solutions. 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 the 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 remote 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. Although the Company exited the Vapotherm Access call center business, the underlying technology is being incorporated in the Company’s home based device it has been actively developing at its Technology Center in Singapore. While these device and digital solutions function independently, the Company believes leveraging the two together can create a unique healthcare ecosystem, focused on delivering high quality, efficient respiratory care in a variety of settings.

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 suffering from respiratory distress, including 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 HVT 2.0 and Precision Flow systems (together, “High Velocity Therapy 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 initial 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) in 2021, transitioned to full market release in August 2022, and received clearance for expanded respiratory distress indications in December 2022.

The Company sells its High Velocity Therapy systems to hospitals through a direct sales organization in the United States and in select international markets and through distributors in other select international markets. In late 2020, the Company launched its OAM in select international markets, which can be used with most versions of the Company’s Precision Flow system, and OAM capability has been built into the HVT 2.0 for future 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 OAM is sold through a direct sales organization in select international markets and through distributors in select international markets. The Company is no longer seeking FDA approval to market the Precision Flow version of the OAM in the United States, but will instead focus future efforts on the HVT 2.0 version of the OAM for the United States market. In addition, the Company employs field-based clinical managers 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.

Going Concern

The Company has evaluated whether or not its cash, cash equivalents and restricted cash on hand and working capital would be sufficient to sustain forecasted operating activities through May 9, 2025 (“evaluation period”), as required by Accounting Standards Codification (“ASC”) 205-40, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. As of March 31, 2024, the Company had cash, cash equivalents and restricted cash of $4.4 million, negative working capital of $96.4 million and outstanding debt under the Company’s Loan and Security Agreement (the “SLR Loan Agreement”) with the lenders party thereto (each a “lender” and collectively, “SLR” or the “Lenders”) of $113.8 million. The Company is presently not in compliance with its minimum liquidity covenant of $5.0 million (the “Liquidity Covenant”) and the term loans under the SLR Loan Agreement have become puttable at the sole discretion of SLR. As of the date of these condensed consolidated financing statements are available

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for issuance, SLR has not declared the Company in default on the Liquidity Covenant. The Company had an accumulated deficit of $563.0 million as of March 31, 2024 and incurred a net loss of $14.8 million and generated a cash flow deficit from operations of $6.6 million, both for the three months ended March 31, 2024.

Based on its recurring losses, current financial forecasts and its continuing noncompliance with the Liquidity Covenant, the Company believes its existing cash resources and borrowing capacity under its SLR Loan Agreement, anticipated cash receipts from sales of its products and monetization of its existing inventory balances will not be sufficient to meet its anticipated cash requirements during the next 12 months, which raises substantial doubt about the Company’s ability to continue as a going concern. To ensure adequate liquidity, the Company is in discussions with SLR about restructuring its debt and evaluating various external financing options, although no assurance can be provided that the Company will be successful in restructuring its debt or securing additional sources of funds to support its operations, or if such funds are available to the Company, that such additional financing will be sufficient to meet the Company’s needs or on terms acceptable to the Company. This is particularly true if economic and market conditions deteriorate or if the Company’s business deteriorates. Any such transaction or restructuring could be dilutive to existing stockholders. In addition, on March 26, 2024, the Company entered into an amendment to its SLR Loan Agreement while the Company evaluates its debt restructuring and financing options. This amendment provided for a $4.0 million term B facility and extends the Company’s option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period from March 1, 2024 through April 30, 2024 with an additional extension to include interest accruing through May 31, 2024 at the sole discretion of SLR, (see Note 7). The Company believes its relationship with SLR is good. Since these restructuring and financing options are not considered probable under current accounting standards, they are not considered in the evaluation of available resources. There is inherent uncertainty associated with fundraising activity and it is not in the Company’s complete control. If the Company is unable to restructure its debt and/or obtain additional financing, it would be required to curtail operations significantly, including reducing its operating expenses which, in turn would, negatively impact the Company’s sales, or even cease operations. Any debt restructuring or additional financing that the Company raises may contain terms that are not favorable to the Company or its stockholders and could result in additional dilution. As a result, substantial doubt exists about the Company’s ability to continue as a going concern within the evaluation period.

The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties described above. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

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VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The information included in these condensed consolidated financial statements on this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” in the Company’s 2023 Form 10-K and are updated, as necessary, in this report. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP.

Principles of Consolidation

These condensed consolidated financial statements include the accounts of the Company, which includes its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Segment Information

Operating segments are defined as components of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company globally manages the business within one reporting segment, Vapotherm, Inc., and two reporting units, Vapotherm and Vapotherm UK Ltd. (“Vapotherm UK”). Segment information is consistent with how the chief operating decision maker reviews the business, makes investing and resource allocation decisions and assesses operating performance.

As of March 31, 2024, the majority of the Company’s long-term assets are located in the United States. Long-term assets located outside the United States totaled $14.6 million, including $8.9 million located in Mexico, at March 31, 2024. Long-term assets located outside the United States totaled $14.9 million, including $9.9 million located in Mexico, at December 31, 2023.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. The Company evaluates its estimates on an ongoing basis. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant estimates relied upon in preparing these condensed consolidated financial statements include calculation of stock-based compensation, valuation of warrants, realizability of inventories, allowance for credit losses, accrued expenses, the valuation allowances against deferred income tax assets, and assessments of impairment with respect to long-lived and intangible assets, including goodwill. Actual results may differ from these estimates.

Reclassification

Certain amounts in 2023 have been reclassified to conform to the presentation in 2024. None of the reclassifications had any impact on the Company’s results of operations.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2024, and the condensed consolidated statements of comprehensive loss, stockholders’ deficit and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments,

11

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2024 and the results of its operations and cash flows for the three months ended March 31, 2024 and 2023. The financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are also unaudited. The results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Financial Instruments and Concentrations of Credit Risk

As of March 31, 2024, the Company’s financial instruments included cash and cash equivalents, restricted cash, accounts receivable, accounts payable and debt, the carrying amounts of which approximated fair value due to their short-term nature or market interest rates. All of the Company’s cash and cash equivalents are maintained at creditworthy financial institutions. At March 31, 2024, deposits exceed the amount of any insurance provided and are exposed to credit loss.

The Company extends credit to customers in the normal course of business but typically does not require collateral or any other security to support amounts due. Management performs ongoing credit evaluations of its customers. The Company recognizes an allowance for credit losses equal to its current estimate of all contractual cash flows that the Company does not expect to collect. The Company’s estimate considers relevant information about past events, current conditions, and reasonable and supportable forecasts. Provisions for the allowance for credit losses are recorded in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive loss.

Supplier Risk

The Company obtains some of the components and subassemblies included in its High Velocity Therapy systems and its OAM from single source suppliers. The partial or complete loss of one or more of these suppliers could cause significant production delays, an inability to meet customer demand and a substantial loss in revenue.

Foreign Currency and Foreign Operations

The functional currency of the Company is the currency of the primary economic environment in which the entity operates, which is the U.S. dollar. For the Company’s non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign currency exchange rates for the period. Adjustments resulting from the translation of the financial statements of its foreign operations into U.S. dollars are excluded from the determination of net loss and are recorded in accumulated other comprehensive income (loss), a separate component of stockholders’ deficit.

Realized foreign currency gains or losses arising from transactions denominated in foreign currencies are recorded in other (expense) income in the condensed consolidated statements of comprehensive loss. Unrealized foreign currency gains or losses arising from transactions denominated in foreign currencies are recorded in accumulated other comprehensive income (loss).

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid temporary investments purchased with original maturities of 90 days or less to be cash equivalents. The Company holds restricted cash and restricted cash equivalents related to certificates of deposits and collateral in relation to lease agreements. As of March 31, 2024, $0.9 million of the Company’s $4.4 million of cash, cash equivalents and restricted cash balance was located outside the United States. As of December 31, 2023, $1.9 million of the Company’s $10.8 million of cash, cash equivalents and restricted cash balance was located outside of the United States. The Company’s cash, cash equivalents

12

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

and restricted cash balances are primarily held by Canadian Imperial Bank of Commerce Innovation Banking (“CIBC”) and Bank of America, N.A.

The following table presents the components of total cash, cash equivalents, and restricted cash as set forth in the Company’s condensed consolidated statements of cash flows:

	March 31, 2024		December 31, 2023
Cash and cash equivalents	$	3,304	$	9,725
Restricted cash		1,109		1,109
Total cash, cash equivalents, and restricted cash	$	4,413	$	10,834

Leases

The Company’s operating leases primarily consist of real estate leases for office, manufacturing, research and development, and warehouse space, as well as certain vehicle and equipment leases. Accounting Standards Codification (“ASC”), Leases (“ASC 842”) requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset, subject to certain permitted accounting policy elections. Under ASC 842, the Company determines whether a contract is or contains a lease at the inception of the contract. This determination is based on whether the contract provides the Company the right to control the use of a physically distinct asset and substantially all of the capacity of an asset. Leases with an initial noncancelable term of twelve months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise are classified as short-term leases. The Company has elected as an accounting policy to exclude from the consolidated balance sheets the right-of-use assets and lease liabilities related to short-term leases. The Company recognizes rent expense for its operating leases on a straight-line basis over the term of the lease.

Certain of the Company’s leases include options to extend or terminate the lease at its sole discretion. The Company does not consider in the measurement of right-of-use assets and lease liabilities an option to extend or terminate a lease if the Company is not reasonably certain to exercise the option. Certain of the Company’s leases include covenants that oblige the Company, at its sole expense, to repair and maintain the leased asset periodically during the lease term. The Company is not a party to any leases that contain residual value guarantees.

Many of the Company’s leases include fixed and variable payments. Among other charges, variable payments related to real estate leases include real estate taxes, insurance, operating expenses, and common area maintenance, which are usually billed at actual amounts incurred proportionate to the Company’s rented square feet of the building. Variable payments related to vehicle and equipment leases relate to usage of the underlying asset, sales and use tax, and value-added tax. Variable payments that do not depend on an index or rate are expensed as incurred and are not included in the measurement of the lease liability.

In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. buildings, vehicles, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). The fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated to the lease components and non-lease components based on their relative fair values. The Company elected the accounting policy to not separate lease and non-lease components for its real estate, vehicle, and equipment leases. Therefore, each lease component and the related non-lease components and non-components are accounted for together as a single component.

The Company measures its lease liability for each leased asset as the present value of lease payments, as defined in ASC 842, discounted using a discount rate specific to the terms of the underlying lease. The Company’s right-of-use assets are equal to the related lease liabilities, adjusted for lease incentives received including tenant improvement allowances, initial direct costs incurred related to the lease, and payments made to the lessor prior to the lease commencement date. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company estimates its incremental borrowing rate for each leased asset based on the interest rate the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

When impairment indicators are present, the Company evaluates the recoverability of its right-of-use assets. If the assessment indicates an impairment, the affected assets are written down to fair value (see Note 9).

13

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Product Warranty

The Company provides its customers with a standard one-year warranty on its capital equipment sales. Warranty costs are accrued based on actual historical trends and estimated at the time of sale. The warranty liability is included within accrued expenses and other current liabilities in the condensed consolidated balance sheets. A roll-forward of the Company’s warranty liability from December 31, 2023 to March 31, 2024 is as follows:

Balance at December 31, 2023	$	303
Provisions for warranty obligations		(5	)
Settlements		(57	)
Balance at March 31, 2024	$	241

Revenue Recognition

The Company’s revenue is primarily derived from the sale of products, leases and services. Product revenue consists of capital equipment and single-use disposables that are shipped and billed to customers both domestically and internationally. The Company’s main capital equipment products are the High Velocity Therapy systems. The Company’s main disposable products are single-use disposables and nasal interfaces, or cannulas, and adaptors. Lease revenue consists of two components which include capital equipment that the Company leases to its customers and, in certain situations, an allocation from disposable revenue to other lease revenue upon the sale of disposable products in bundled arrangements involving the placement of the High Velocity Therapy capital units for use by the customer at no upfront charge in connection with the customer’s ongoing purchase of disposable products. Service revenue consists of fees associated with routine service of capital units and the sale of extended service contracts and preventative maintenance plans, which are purchased by a small portion of the Company’s customer base. In addition, the Company sells small quantities of component parts in the United States, United Kingdom, and to third-party international service centers who provide service on the High Velocity Therapy capital units outside of the United States and United Kingdom. Freight revenue is based upon actual freight costs plus a percentage markup of such costs associated with the shipment of products domestically, and to a lesser extent, internationally, and is included in service revenue. Rebates and fees consist of contractually obligated administrative fees and percentage-of-sales rebates paid to Group Purchasing Organizations (“GPOs”), Integrated Delivery Networks (“IDNs”) and distributor partners and are accounted for as a reduction to the corresponding revenue category.

Under the Financial Accounting Standard Board’s (“FASB”) ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and assesses whether each promised good or service is distinct and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value-added, and other taxes collected on behalf of third parties are excluded from revenue. The Company’s standard payment terms are generally 30 days from the date of sale.

Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative stand-alone selling prices of the promised products or services underlying each performance obligation. The Company determines stand-alone selling prices based on the price at which the performance obligation is sold separately. If the stand-alone selling price is not observable through past transactions, the Company estimates the stand-alone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Revenue is generally recognized when the customer obtains control of the Company’s product, which generally occurs at a point in time upon shipment based on the contractual shipping terms of a contract.

Product and service revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, the Company

14

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value amount method to which the Company expects to be entitled. As such, revenue on sales is recorded net of prompt pay discounts and payments made to GPOs, IDNs and distributors. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Determination of whether to include estimated amounts in the transaction price is based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. The Company believes that the estimates it has established are reasonable based upon current facts and circumstances. Applying different judgments to the same facts and circumstances could result in different estimates.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying a practical expedient under ASC 606, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component during the three months ended March 31, 2024 or 2023.

The Company’s contracts with its customers generally have a duration of less than one year. Therefore, the Company has elected to apply a practical expedient and recognizes the incremental costs of obtaining contracts as an expense. These costs are included in sales and marketing expenses in the accompanying condensed consolidated statements of comprehensive loss.

Lease Revenue

The Company also enters into agreements to lease its capital equipment. For such sales, the Company accounts for revenue under ASC 842, and assesses and classifies these transactions as sales-type or operating leases based on whether the lease transfers ownership of the equipment to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term. Equipment included in arrangements including transfer of title are accounted for as sales-type leases and the Company recognizes the present value of the lease payments due over the lease term as revenue at the inception of the lease. The Company records the present value of future lease payments in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets; these amounts each totaled $0.1 million at March 31, 2024 and December 31, 2023. Equipment included in arrangements that do not include the transfer of title, nor any of the sales-type or direct financing lease criteria, are accounted for as operating leases and revenue is recognized on a straight-line basis over the term of the lease.

The Company also enters into agreements involving the placement of its High Velocity Therapy capital units for use by the customer at no upfront charge in connection with the customer’s ongoing purchase of disposable products. In these bundled arrangements, revenue recognized for the sale of the disposables is allocated between disposable revenue and other lease revenue based on the estimated relative stand-alone selling prices of the individual performance obligations.

Shipping and Handling Costs

Amounts billed to customers for shipping and handling are included in service revenue. Shipping and handling costs are included in cost of revenue. Shipping and handling activities are accounted for as activities to fulfill a contract and are accrued when the customer obtains control of the Company’s product. The total costs of shipping and handling for the three months ended March 31, 2024 and 2023 were $0.2 million and $0.3 million, respectively.

Sales and Value-Added Taxes

When required by local jurisdictions, the Company bills its customers for sales tax and value-added tax calculated on each sales invoice and records a liability for the sales and value-added tax payable, which is included in accrued expenses and other current liabilities in the condensed consolidated balance sheets. Sales tax and value-added tax billed to a customer are not included in the Company’s revenue.

Stock-Based Compensation

The Company maintains an equity incentive plan to provide long-term incentives for employees, consultants, and members of the board of directors. The plan allows for the issuance of non-statutory and incentive stock options, restricted stock, unrestricted

15

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

stock, stock units, including restricted stock units and performance stock units, and stock appreciation rights to employees, consultants and non-employee directors. The Company recognizes stock-based compensation expense for awards of equity instruments to employees and non-employees based on the grant date fair value of those awards in accordance with ASC Topic 718, Stock Compensation (“ASC 718”). ASC 718 requires all equity-based compensation awards, including grants of restricted stock, restricted stock units, performance stock units and stock options, to be recognized as expense in the condensed consolidated statements of comprehensive loss based on their grant date fair values.

The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. The fair value of restricted stock and restricted stock units is measured at the market value of the related shares of the Company’s common stock on the grant date. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period and is generally three to four years. For performance-based awards, the related compensation cost is amortized over the performance period on an accelerated attribution basis. Compensation cost associated with performance awards is based on fair value on the date of grant and the number of units expected to be earned after assessing the probability that certain performance criteria will be met and the associated targeted payout level that is forecasted will be achieved. Cumulative adjustments are recorded each quarter to reflect estimated outcomes of the performance-related conditions until the results are determined and settled. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including the expected life (weighted average period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock and an assumed risk-free interest rate. Expected volatility is based on the historical volatility of the Company’s common stock. The expected life is estimated using the historical life of options issued under the Company’s equity plan. The risk-free interest rate is based on U.S. Treasury rates with a remaining term that approximates the expected life assumed at the date of grant. No dividend yield is assumed as the Company does not pay, and does not expect to pay, dividends on its common stock. The Company estimates forfeitures based on historical experience with pre-vested forfeitures. To the extent actual forfeitures differ from the estimate, the difference is recorded to compensation expense in the period of the forfeiture.

The Company recognizes stock-based compensation expense for shares of its common stock issued pursuant to the Vapotherm, Inc. 2018 Employee Stock Purchase Plan (“ESPP”) on a straight-line basis over the related offering period. The Company estimates the fair value of shares to be issued under the ESPP based on a combination of options valued using the Black-Scholes option pricing model. The expected life is determined based on the contractual term. Dividend yield, risk-free interest rate, forfeiture rates, and expected volatility are estimated in a manner similar to option grants described above.

Income Tax

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the condensed consolidated financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial reporting and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the condensed consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the condensed consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

The Company’s major tax jurisdictions are the state of New Hampshire, the United States, United Kingdom, Germany, Mexico, Singapore, and Brazil. The provision for income taxes for each of the three months ended March 31, 2024 and 2023 totaled less than $0.1 million, and related to income earned by the Company’s foreign subsidiaries after accounting for transfer pricing adjustments.

16

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and tax credit carryforwards that can be utilized to offset future taxable income and reduce taxes, respectively. The Company has not currently completed an evaluation of ownership changes through December 31, 2023 to assess whether utilization of the Company’s net operating loss and tax credit carryforwards would be subject to an annual limitation under Sections 382 and 383 of the Code. To the extent an ownership change is determined to have occurred under Sections 382 and 383 of the Code, the net operating loss and tax credit carryforwards may be subject to limitation.

Recently Issued Accounting Pronouncements

Improvements to Reportable Segment Disclosures (Topic 280):

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses and segment-related data. For public companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.

Improvements to Income Tax Disclosure (Topic 740):

In December 2023, the FASB issued ASU No. 2023-09, Income Tax (Topic 740) - Improvements to Income Tax Disclosures which requires companies to break out their income tax expense, income tax rate reconciliation and income tax payments made in more detail. For public companies, the requirements will become effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.

3. Fair Value Measurements

In accordance with ASC 820, Fair Value Measurements and Disclosures, the Company generally defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements), and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 – inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

As of March 31, 2024, the Company had two items, cash equivalents and an embedded derivative, measured at fair value on a recurring basis. The Company’s cash equivalents primarily consist of money market deposits which totaled approximately less than $0.1 million at March 31, 2024 and are valued based on Level 1 of the fair value hierarchy. The Company’s embedded derivative relates to the Company’s financing arrangement (see Note 7). Its fair value is deemed to be immaterial at March 31, 2024 and is valued based on Level 3 of the fair value hierarchy. There were no transfers in or out of Level 1, 2 or 3 during the three months ended March 31, 2024.

17

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

During the first quarter of 2024 and 2023, the Company issued SLR warrants to purchase 79,146 shares and 13,547 shares of common stock (the “SLR PIK Warrants”), respectively. The issuance of the warrants were made pursuant to amendments to the Company’s financing arrangement (see Note 7). These equity-classified PIK Warrants were valued using the Black-Scholes pricing model, which falls within Level 3 of the fair value hierarchy.

The fair value of the warrants are estimated on the date of grant using the Black-Scholes pricing model with the following range of assumptions:

	2024	2023
Expected dividend yield	0.0%	0.0%
Risk free interest rate	4.1%-4.5%	4.0%-4.6%
Expected stock price volatility	20.8%-21.0%	20.8%-20.9%
Expected term (years)	2.5	2.5

4. Accounts Receivable

Accounts receivable consists of the following:

	March 31, 2024			December 31, 2023
United States	$	6,854		$	6,837
International		3,578			3,995
Total accounts receivable		10,432			10,832
Less: Allowance for expected credit losses		(229	)		(160	)
Accounts receivable, net of expected credit losses	$	10,203		$	10,672

A roll-forward of the Company’s allowance for credit losses from December 31, 2023 to March 31, 2024 is as follows:

Balance at December 31, 2023	$	160
Change in provision for credit losses		69
Write-offs of uncollectible balances		-
Balance at March 31, 2024	$	229

No individual customer accounted for 10% or more of net revenue for the three months ended March 31, 2024 or 2023. No individual customer accounted for 10% or more of total accounts receivable at March 31, 2024. One customer accounted for 10% of total accounts receivable as of December 31, 2023.

5. Inventories

Inventory balances, net of reserves, consist of the following:

	March 31, 2024		December 31, 2023
Raw materials	$	12,050	$	11,982
Finished goods		11,509		9,954
Component parts		504		1,032
Total inventories	$	24,063	$	22,968

The Company recorded a provision for excess and obsolete inventory of $0.2 million for the three months ended March 31, 2023. There was no provision for excess and obsolete inventory recorded during the three months ended March 31, 2024.

18

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

6. Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities

Accrued expenses and other current liabilities consist of the following:

	March 31, 2024		December 31, 2023
Accrued term loan fees	$	8,760	$	-
Operating lease liabilities, current portion		2,377		2,414
Accrued inventories		1,193		596
Accrued income, sales and other taxes		1,100		997
Accrued bonuses		1,056		1,927
Accrued payroll and employee-related costs		1,023		781
Accrued interest		867		847
Accrued commissions		640		548
Accrued professional fees		550		617
Accrued supplier costs		450		450
Accrued vacation liability		408		494
Product warranty reserve		241		303
Accrued freight		222		243
Accrued rent and restoration costs		-		489
Other		1,644		2,099
Total accrued expenses and other current liabilities	$	20,531	$	12,805

Other long-term liabilities consist of the following:

	March 31, 2024		December 31, 2023
Operating lease liabilities	$	2,521	$	2,919
Accrued term loan fees		-		3,874
Other		4		4
Total other long-term liabilities	$	2,525	$	6,797

7. Debt

Credit Facilities

On February 18, 2022 (the “Effective Date”), the Company entered into the SLR Loan Agreement with SLR which provided for a term A loan facility of $100.0 million (the “Term A Loan Facility”). The Term A Loan Facility was funded to the Company on the Effective Date. In connection with this funding, the Company issued SLR warrants to purchase 13,421 shares of the Company’s common stock at an exercise price of $111.76 per share, which were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and expire in February 2032. The proceeds of the Term A Loan Facility were used to repay all indebtedness under the Company’s prior loan agreement with CIBC.

On November 22, 2022 (the “Third Amendment Effective Date”), the Company entered into an Amendment No. 3 to the SLR Loan Agreement (the “Third Amendment,” together with SLR Loan Agreement, as amended prior to the Third Amendment Effective Date, the “Third Amended SLR Loan Agreement”) with SLR. Pursuant to the Third Amendment:

•the Company’s minimum net product revenue covenant was modified for 2023;

•the minimum liquidity covenant was reduced to $5 million from $20 million; and

•an option was added, at the Company’s sole discretion, to pay up to 8% of the interest under the Third Amended SLR Loan Agreement in-kind (rather than solely in cash as provided for prior to the Third Amendment Effective Date)

19

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

during 2023 (the “PIK Interest”), subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to the lenders equal to 5% of the PIK Interest.

On February 10, 2023 (the “Fourth Amendment Effective Date”), the Company entered into an Amendment No. 4 to the SLR Loan Agreement (the “Fourth Amendment,” together with the Third Amended SLR Loan Agreement, the “Fourth Amended SLR Loan Agreement”) with SLR. The Fourth Amendment includes the option for the Company to pay up to 9% of the interest in-kind (rather than up to 8% as provided for prior to the Fourth Amendment Effective Date) during 2023.

Additionally, if the Company elects PIK Interest of 9%, the amount of warrants to be issued to SLR increases to be 5% times the amount of PIK Interest for the first 4% of the PIK Interest selected and 12.20% times on the next 5% of the amount of PIK Interest selected to provide for a weighted average of 9%, and the Company’s monthly interest expense increases by 1% for the month in which such PIK Interest is selected. The Fourth Amendment also provided for a reset of the exercise price of the warrants to be issued in connection with the Company’s election of PIK Interest, including existing PIK Warrants, equal to the lower of the Company’s closing stock price for (a) the 10-day trailing average closing price ending on the day before the interest payment date, (b) the day before the interest payment date, or (c) $9.36 per share.

On April 17, 2023, the Company entered into an Amendment No. 5 to the SLR Loan Agreement (the “Fifth Amendment,” together with the Fourth Amended SLR Loan Agreement, the “Fifth Amended SLR Loan Agreement”) with SLR to exclude the Company’s Singapore subsidiary operating account from the requirement of a control agreement in favor of SLR, provided the account balance is the lower of (i) $250,000 or (ii) the amount required to fund expenditures therefrom within the next ten business days. The Fifth Amendment also contains other customary provisions, such as expense reimbursement.

On February 21, 2024, the Company entered into an Amendment No. 6 to the SLR Loan Agreement (the “Sixth Amendment,” together with the Fifth Amended SLR Loan Agreement, the “Sixth Amended SLR Loan Agreement”) with SLR to extend the Company’s option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period January 1, 2024 through February 29, 2024, subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to equal 9% of the PIK Interest.

On March 26, 2024 (the “Seventh Amendment Effective Date”), the Company entered into an Amendment No. 7 to the SLR Loan Agreement (the “Seventh Amendment,” together with the Sixth Amended SLR Loan Agreement, the “Seventh Amended SLR Loan Agreement”) with SLR. The Seventh Amendment established a term B loan facility of $4.0 million (the “Term B Loan Facility”). Borrowings under the Term B Loan Facility are available from the Seventh Amendment Effective Date until July 26, 2024 (the “Term B Maturity Date”) and shall be conditioned on approval by the lenders’ investment committee in its sole discretion. On the Seventh Amendment Effective Date, $2.0 million was funded to the Company. On April 26, 2024, an additional $1.0 million was funded to the Company under the Term B Loan Facility. The Term B Loan Facility provides for interest-only payments and aggregate principal outstanding shall be due and payable on the Term B Maturity Date. The Company will be required to make a payment of 0.2% of the aggregate principal amount of the Term B Loan Facility funded (the “Term B Facility Exit Fee”), which is payable on the earliest to occur of (i) the Term B Maturity Date, (ii) the acceleration of the Seventh Amended SLR Loan Agreement prior to the Term B Maturity Date, and (iii) the prepayment date of the Seventh Amended SLR Loan Agreement prior to the Term B Maturity Date. The Term B Facility Exit Fee of less than $0.1 million is considered fully earned by SLR as of the Seventh Amendment Effective Date and has been fully accrued as of March 31, 2024 due to the Company’s continuing noncompliance with the Liquidity Covenant. In addition, the Seventh Amendment extended the Company’s option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period from March 1, 2024 through April 30, 2024 with an additional extension to include interest accruing through May 31, 2024 at the sole discretion of SLR. The PIK Interest extension is subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to equal to 9% of the PIK Interest.

Pursuant to the Seventh Amended SLR Loan Agreement, advances under the Term A Loan Facility bear interest at a floating rate per annum equal to (a) the greater of (i) 1.00% or (ii) the 1-month Chicago Mercantile Exchange (“CME”) Term Secured Overnight Financing Rate (“SOFR”) plus 0.10%, plus (b) (i) 8.30% under a PIK Interest option of 4% or 0%, or (ii) 9.30% under a PIK Interest option of 9%. Advances under the Term B Loan Facility bear interest at a floating rate per annum equal to the sum of (a) 0.10%, plus (b) 8.30% plus (c) the 1-month CME Term SOFR plus 0.10%. At March 31, 2024, the interest rate under the Term A Loan Facility and Term B Loan Facility was 14.72% and 13.82%, respectively. The Company paid interest in-kind on the Term A Loan Facility totaling $2.5 million and $2.1 million during the three months ended March 31, 2024 and 2023, respectively. The outstanding balance under the Term A Loan Facility and Term B Loan Facility was $111.8 million and $2.0 million, respectively, at March 31, 2024. The Term A Loan Facility provides for interest-only payments for the first 48 months following the Effective Date.

20

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Thereafter, principal payments on the Term A Loan Facility are due monthly in 12 equal installments; provided that the Company has the option to extend the interest-only period for an additional 12 months upon achievement of a certain minimum revenue level as more fully described in the Seventh Amended SLR Loan Agreement. The Term A Facility will mature on February 1, 2027 (the “Term A Maturity Date”). The Seventh Amended SLR Loan Agreement may be prepaid in full, subject to a prepayment charge of 1.0%, if such prepayment occurs after February 18, 2024 but on or prior to the Term A Maturity Date (the “Prepayment Penalty”). In addition to the payment of principal and accrued interest, the Company will be required to make a payment of 7.45% of the aggregate principal amount of the Term A Loan Facility funded (the “Term A Facility Exit Fee”), which is payable on the earliest to occur of (i) the Term A Maturity Date, (ii) the acceleration of the Seventh Amended SLR Loan Agreement prior to the Term A Maturity Date, and (iii) the prepayment date of the Seventh Amended SLR Loan Agreement prior to the Term A Maturity Date. The Term A Facility Exit Fee of $7.5 million is considered fully earned by SLR as of the Effective Date and has been fully accrued as of March 31, 2024 due to the Company’s continuing noncompliance with the Liquidity Covenant. In connection with the Seventh Amended SLR Loan Agreement, the Company has incurred direct financing costs related to fees and non-cash consideration paid to SLR and fees paid to third parties of $2.2 million and $1.6 million, respectively, as of March 31, 2024. The Seventh Amended SLR Loan Agreement is secured by a lien on substantially all of the assets, including intellectual property, of the Company.

The Seventh Amended SLR Loan Agreement contains customary covenants and representations, including, without limitation, a minimum revenue covenant equal to a percentage of each month’s forecasted net product revenue as defined in the Seventh Amended SLR Loan Agreement (tested on a trailing six month basis at the end of each fiscal month, commencing with the six month period ending on August 31, 2022), the Liquidity Covenant, and other financial covenants, reporting obligations, and limitations on dispositions, changes in business or ownership, mergers or acquisitions, indebtedness, encumbrances, distributions and investments, transactions with affiliates and capital expenditures. As of March 31, 2024, the Company was not in compliance with the Liquidity Covenant as its unrestricted cash balance was less than $5.0 million. As the Seventh Amended SLR Loan Agreement is considered callable at the sole discretion of SLR, the outstanding principal is presented as a current liability on the condensed consolidated balance sheet at March 31, 2024. The Term A Facility Exit Fee and Term B Facility Exit Fee have been fully accrued as of March 31, 2024 as a component of accrued expenses and other current liabilities. The Company was in compliance with all other financial covenants under the Seventh Amended SLR Loan Agreement at March 31, 2024.

The events of default under the Seventh Amended SLR Loan Agreement include, without limitation, and subject to customary grace periods, (1) the Company’s failure to make any payments of principal or interest under the Seventh Amended SLR Loan Agreement or any other loan documents, (2) the Company’s breach or default in the performance of any covenant under the Seventh Amended SLR Loan Agreement, (3) the occurrence of a material adverse effect or an event that is reasonably likely to result in a material adverse effect, (4) the existence of an attachment or levy on a material portion of the Company’s funds or of the Company’s subsidiaries, (5) the Company’s insolvency or bankruptcy, or (6) the occurrence of certain material defaults with respect to any other of the Company’s indebtedness in excess of $500,000. If an event of default occurs, SLR is entitled to take enforcement action, including an incremental 5% interest rate increase or acceleration of amounts due under the Seventh Amended SLR Loan Agreement (the “Mandatory Prepayment Option”). The Company determined the Mandatory Prepayment Option to be an embedded derivative that is required to be bifurcated from the Seventh Amended SLR Loan Agreement. The Company determined the probability of SLR exercising the Mandatory Prepayment Option due to the Company’s continuing noncompliance with the Liquidity Covenant to be remote and deemed its fair value to be immaterial as of March 31, 2024. The Company re-evaluates the fair value of the Mandatory Prepayment Option at the end of each reporting period.

The Seventh Amended SLR Loan Agreement also contains other customary provisions, such as expense reimbursement and confidentiality. SLR has indemnification rights and the right to assign the Seventh Amended SLR Loan Agreement, subject to customary restrictions.

The annual principal maturities of the Company’s Seventh Amended SLR Loan Agreement as of March 31, 2024 are as follows:

2024 (remaining 9 months)	$	113,836
Less: Unamortized deferred financing costs		(2,166	)
Loans payable, net	$	111,670

21

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

8. Commitments and Contingencies

Lease Commitments

The Company’s operating lease commitments as of December 31, 2023 are described in Note 10 of the notes to the financial statements included in the 2023 Form 10-K.

The following table presents operating lease cost and information related to operating right-of-use and operating lease liabilities for the periods indicated:

	Three Months Ended March 31,
	2024			2023
Operating lease cost	$	348		$	568
Variable lease cost		115			103
Total	$	463		$	671
Operating cash flow impacts:
Cash paid for amounts included in measurement of lease   liabilities	$	753		$	766
Weighted average remaining lease term - operating leases   (in years)		3.4			3.7
Weighted average discount rate - operating leases		10.4	%		9.2	%

As of March 31, 2024, future maturities of lease liabilities under the Company’s noncancelable operating leases are as follows:

	Total Due
2024 (remaining 9 months)	$	2,259
2025		1,177
2026		811
2027		525
2028		481
Thereafter		655
Total payments		5,908
Less interest		(1,010	)
Total present value of lease payments	$	4,898

Legal Matters

From time to time, the Company may become involved in various legal proceedings, including those that may arise in the ordinary course of business. The Company believes there is no litigation pending that could have, individually, or in the aggregate, a material adverse effect on the results of its operations or financial condition.

Guarantees

During the second quarter of 2022, in connection with the Company’s plan to move substantially all of its manufacturing operations from New Hampshire to Mexico, the Company entered into an agreement with TACNA Services, Inc. (“TACNA”) under which TACNA manages the Company’s manufacturing operations in Mexico. In furtherance thereof, Baja Fur, S.A. de C.V. (the “Lessee”), a subsidiary of TACNA, entered into a lease agreement (the “Lease”) with Fraccionadora Residencial Hacienda Agua Caliente, S. de R.L. de C.V. (the “Lessor”), whereby the Lessee agreed to lease property in Tijuana, México to be used as the Company’s manufacturing facility in Mexico. Under Mexican law, the Lease became a legally binding agreement on July 8, 2022. As an inducement to the Lessee and Lessor to enter into the Lease, the Company entered into an absolute unconditional corporate guaranty agreement (the “Guaranty Agreement”) pursuant to which the Company agreed to guaranty the prompt and complete payment and performance when due, whether by acceleration or otherwise, of all obligations, liabilities and covenants of the Lessee to

22

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

the Lessor pursuant to the Lease, including all amounts due under the Lease. The Guaranty Agreement will terminate once all obligations of the Lessee arising under the Lease have been satisfied in full and the Lease has been terminated or fully performed. The total obligation outstanding under the Guaranty Agreement was $1.3 million as of March 31, 2024 and was recorded as an operating lease liability in these condensed consolidated financial statements.

Other Commitments

As of March 31, 2024, the Company has non-cancellable purchase commitments for inventories, capital equipment and services as follows:

	Total Due
2024 (remaining 9 months)	$	7,656
2025		1,593
2026		38
	$	9,287

9. Restructuring

On April 27, 2022, the Company committed to a plan (the “April 2022 Restructuring”) to relocate substantially all of its manufacturing operations from Exeter, New Hampshire to a company operated manufacturing facility in Tijuana, Mexico and announced a reduction in force at the Exeter, New Hampshire facility that eliminated positions related to production, quality and operations services. As part of the April 2022 Restructuring, the Company also incurred severance related expenses due to senior level personnel retirements and transitions. The termination benefits are classified in the Company’s condensed consolidated statements of comprehensive loss in the manner in which the employees’ salaries and related costs were classified. The Company does not expect to incur additional costs associated with the April 2022 Restructuring.

In late August 2022, in conjunction with the Company’s path to profitability and annual operating planning efforts, the Company committed to a plan (the “August 2022 Restructuring”) to exit the Vapotherm Access call center business and its pulmonology practice, RespirCare, and to restructure its commercial organization in the United States. As a result of the August 2022 Restructuring, the Company eliminated positions related to patient care, marketing and administrative services at Vapotherm Access and RespirCare and executed a reduction in force of the Company’s United States field teams. As part of the August 2022 Restructuring, the Company also incurred severance related expenses due to personnel transitions. The termination benefits are classified in the Company’s condensed consolidated statements of comprehensive loss in the manner in which the employees’ salaries and related costs were classified. The Company does not expect to incur additional costs associated with the August 2022 Restructuring.

There were no restructuring expenses recorded during the three months ended March 31, 2024. All amounts related to the April 2022 and the August 2022 Restructuring were fully paid in 2023.

The following table summarizes the classification of restructuring expense, including related impairment of right-of-use assets, in the condensed consolidated statements of comprehensive loss during the three months ended March 31, 2023:

Cost of revenue	$	56
Impairment of long-lived and intangible assets		432
Total restructuring expense	$	488

23

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

10. Warrants

The table below sets forth the Company’s warrant activity for the three months ended March 31, 2024:

	Common Stock Warrants
	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2023		3,193,710	$	8.36
Warrants issued		79,146		0.96
Outstanding at March 31, 2024		3,272,856	$	8.18

The Company’s outstanding warrants at March 31, 2024 have exercise prices ranging from $0.008 per share to $112.00 per share and expire at periods ranging from June 10, 2024 through January 2, 2034.

In connection with its PIK Interest option, during the three months ended March 31, 2024, the Company has issued SLR the PIK Warrants to purchase an aggregate of 79,146 shares of common stock. The PIK Warrants have an exercise price of $0.96 per share, were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and have an expiration date of January 2, 2034.

11. Revenue

Disaggregated Revenue

The following table shows the Company’s net revenue disaggregated into categories the Company considers meaningful:

	Three Months Ended March 31,
	2024
	US		International		Total
Net revenue by:
Product revenue
Capital equipment	$	2,236	$	617	$	2,853
Disposable		11,221		2,875		14,096
Subtotal product revenue		13,457		3,492		16,949
Lease revenue
Capital equipment		128		83		211
Other		387		96		483
Service and other revenue		1,112		379		1,491
Total net revenue	$	15,084	$	4,050	$	19,134

	Three Months Ended March 31,
	2023
	US		International		Total
Net revenue by:
Product revenue
Capital equipment	$	2,498	$	810	$	3,308
Disposable		9,348		3,069		12,417
Subtotal product revenue		11,846		3,879		15,725
Lease revenue
Capital equipment		38		92		130
Other		355		108		463
Service and other revenue		775		638		1,413
Total net revenue	$	13,014	$	4,717	$	17,731

24

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

United States and International net revenue is based on the customer location to which the product is shipped. No individual foreign country represents more than 10% of the Company’s aggregated revenue during the three months ended March 31, 2024 or 2023.

Contract Balances from Contracts with Customers

Contract liabilities consist of deferred revenue and other contract liabilities associated with rebates and fees payable to GPOs, IDNs and distributor partners. Deferred revenues are included in contract liabilities in the accompanying condensed consolidated balance sheets. The following table presents changes in contract liabilities during the three months ended March 31, 2024:

	Deferred Revenue			Other Contract Liabilities
Balance at December 31, 2023	$	1,041		$	196
Additions		464			209
Subtractions		(353	)		(196	)
Balance at March 31, 2024	$	1,152		$	209

12. Stock-Based Compensation

On February 27, 2024, the exercise price of all outstanding options to purchase shares of the Company’s common stock, other than options held by non-employee Board members, was reduced to $0.915 per share (the “Option Repricing”). No other terms of the options were modified. The Option Repricing includes vested and unvested options granted under the Vapotherm, Inc. Amended and Restated 2018 Equity Incentive Plan (as amended and restated, the “2018 Equity Plan”) and the Vapotherm, Inc. Amended and Restated 2015 Stock Incentive Plan and the Vapotherm, Inc. Amended and Restated 2005 Stock Incentive Plan. The 2018 Plan also was amended to increase the number of shares of common stock that may be issued in satisfaction of awards under the 2018 Plan by an additional 410,000 shares and was revised to reflect the effect of the Company’s 1-for-8 reverse stock split effected on August 18, 2023 (such plan as amended, the “Amended 2018 Equity Plan”). The Option Repricing resulted in the recognition of additional compensation expense of $0.1 million during the three months ended March 31, 2024.

As of March 31, 2024, 154,352 shares of common stock were available for issuance under the Amended 2018 Equity Plan, assuming actual performance under outstanding performance stock units. To date, stock options, performance awards, restricted stock awards, restricted stock units and performance stock units have been granted under the Amended 2018 Equity Plan.

Stock-based compensation expense was allocated based on the employees’ and non-employees’ functions as follows:

	Three Months Ended March 31,
	2024		2023
Cost of revenue	$	45	$	47
Research and development		508		596
Sales and marketing		762		1,114
General and administrative		519		1,063
Total	$	1,834	$	2,820

Stock Options

There were no options granted under the Amended 2018 Equity Plan during the three months ended March 31, 2024. The Company granted options to purchase an aggregate of 106,071 shares of common stock at exercise prices ranging from $9.68 to $21.60 per share, with a weighted average exercise price of $21.20 per share, during the three months ended March 31, 2023. The weighted average fair value of stock options granted during the three months ended March 31, 2023 was $17.44 per share.

25

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

The weighted average assumptions used in the Black-Scholes options pricing model for the three months ended March 31, 2023 are as follows:

Expected dividend yield	0.0%
Risk free interest rate	3.9%
Expected stock price volatility	103.8%
Expected term (years)	6.1

Restricted Stock Units

A summary of restricted stock unit activity for the three months ended March 31, 2024 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2023		682,832		$	12.43
Granted		54,337			0.99
Vested		(48,631	)		68.67
Canceled		(219	)		2.38
Unvested at March 31, 2024		688,319		$	7.56

Performance Stock Units

The Company has granted performance stock units. The quantity of shares that will ultimately vest and be issued upon settlement of the performance stock units range from 0% to 200% of a targeted number of shares and will be determined based on, and subject to, individual grant milestones.

A summary of performance stock units activity for the three months ended March 31, 2024 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2023		20,491		$	161.53
Vested		(573	)		15.84
Unvested at March 31, 2024		19,918		$	165.68

Employee Stock Purchase Plan

As of March 31, 2024, 157,829 shares of common stock remained available for issuance under the ESPP.

The ESPP provides for successive discrete offering periods of approximately six months or as determined by the plan administrator. The offering periods begin on each January 1st and July 1st or the first trading day thereafter.

The ESPP permits eligible employees to elect to purchase shares of common stock through fixed whole percentage contributions from eligible compensation during each offering period, not to exceed 10% of the eligible compensation a participant receives during an offering period and not to accrue at a rate which exceeds $25,000 of the fair value of the stock (determined on the grant date(s)) for each calendar year. A participant may purchase the lower of (a) a number of shares of common stock determined by dividing such participant’s accumulated payroll deductions on the exercise date by the option price, (b) 625 shares, or (c) such other lesser maximum number of shares as shall have been established by the plan administrator.

Amounts deducted and accumulated by the participant will be used to purchase shares of common stock at the end of each offering period. The purchase price of the shares will be 85% of the lower of the fair value of common stock on the first trading day of each offering period or on the purchase date. Participants may end their participation during an offering period up to ten days in

26

VAPOTHERM, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

advance of the exercise date and will be paid their accumulated contributions that have not been used to purchase shares of common stock. Participation ends automatically upon termination of employment.

The fair value of the purchase right for the ESPP option is estimated on the date of grant using the Black-Scholes pricing model with the following assumptions during 2024:

Expected dividend yield	0.0%
Risk free interest rate	5.2%
Expected stock price volatility	117.6%
Expected term (years)	0.5

13. Net Loss Per Share

As of March 31, 2024 and 2023, the remaining outstanding pre-funded warrants to purchase 226,298 shares of common stock that were issued in connection with the February 2023 Private Placement were included in the basic and diluted net loss per share calculation.

The Company excluded the following potential shares of common stock, based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

	As of March 31,
	2024		2023
Warrants to purchase common stock		3,046,558		2,767,205
Options to purchase common stock		410,548		485,379
Unvested restricted stock units and    performance stock units		708,237		181,038
Employee stock purchase plan shares		15,625		26,971
		4,180,968		3,460,593

14. Related Party Transactions

The Company recorded sales of $0.2 million and $1.1 million during of the three months ended March 31, 2024 and 2023, respectively, to an entity in which a member of the Company’s board of directors holds a management position. There was a credit of $0.2 million and $0.3 million due to this entity at March 31, 2024 and December 31, 2023, respectively.

27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements for the three months ended March 31, 2024, included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the “Risk Factors” section of our 2023 Form 10-K filed with the SEC on February 22, 2024 and in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024. We use certain non-GAAP financial measures that we believe are important for purposes of comparison to prior periods. This information is also used by our management to measure the profitability of our ongoing operations and analyze our business performance and trends.

Vapotherm is a global medical technology company primarily focused on the care of patients of all ages suffering from respiratory distress, whether associated with complex lung diseases such as chronic obstructive pulmonary disease (“COPD”), congestive heart failure (“CHF”), pneumonia, asthma and COVID-19 or other systemic conditions. Our mission is to improve the lives of patients suffering from complex lung disease and other forms of respiratory distress while reducing the cost of their care through integrated device and digital solutions. Our 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. Our digital solutions are focused on remote 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. Although we exited our Vapotherm Access call center business, the underlying technology is being incorporated in our home based device we have been actively developing at our Technology Center in Singapore. While these device and digital solutions function independently, we believe leveraging the two together can create a unique healthcare ecosystem, focused on delivering high quality, efficient respiratory care in a variety of settings.

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 suffering from respiratory distress, including 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. Our HVT 2.0 and Precision Flow systems (together, “High Velocity Therapy 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. Our next generation High Velocity Therapy system, known as HVT 2.0, received initial 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) in 2021, transitioned to full market release in August 2022, and received clearance for expanded respiratory distress indications in December 2022. The HVT 2.0 platform is cleared for therapy in multiple settings of care, although it is presently being marketed primarily for hospital use. As of March 31, 2024, more than 4.4 million patients have been treated with our High Velocity Therapy systems, and we have a global installed base of over 37,900 units, an increase of 2.3% compared to March 31, 2023.

We sell our High Velocity Therapy systems to hospitals through a direct sales organization in the United States and select international markets and through distributors in other select international markets. In late 2020, we launched our OAM in select international markets, which can be used with most versions of our Precision Flow system and OAM capability has been built into the HVT 2.0 for future 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 where these risks include visual or developmental impairment or death. Our OAM is sold through a direct sales organization in select international markets and through distributors in other select international markets. We are no longer seeking FDA approval to market the Precision Flow version of the OAM in the United States, but will instead focus future efforts on the HVT 2.0 version of the OAM for the United States market. We are actively developing our home based device at our Technology Center in Singapore which uses our High Velocity Therapy technology. In addition, we employ field-based clinical managers who focus on medical education and training in the effective use of our products and help facilitate increased adoption and utilization. We focus on physicians, respiratory therapists and nurses who work in acute hospital settings, including the emergency departments and adult, pediatric and neonatal intensive care units. Our relationship with these clinicians is particularly important, as it enables our products to follow patients through the care continuum. As of March 31, 2024, we have sold our High Velocity Therapy systems to over 2,500 hospitals across the United States, and in over 50 countries outside of the United States. Although presently our revenues are derived principally from sales of High Velocity Therapy systems and sales of the single-use disposable vapor transfer cartridges these systems require, we also derive revenues from ancillary products and services related to our High Velocity Therapy systems.

28

In early 2022, there was a significant slowdown in demand for our products that was driven primarily by a decrease in patient acuity from COVID-19 infections as COVID-19 variants transitioned from a lower respiratory disease to an upper respiratory disease. Due to inherent uncertainty in predicting future revenues and certain variable costs, we announced in connection with the release of our first quarter 2022 financial results, our long-term “path to profitability” initiatives. As part of this strategy, we moved substantially all of our manufacturing operations from New Hampshire to Mexico. In the last half of 2022, we established a Technology Center in Singapore to bring most research and development projects in-house, including development of our home based device, to help reduce the cost of external design firms and access local government grant funding and took meaningful steps towards right sizing our commercial organization, including exiting our Vapotherm Access call center business and making reductions to our field teams in the United States and internationally. As a result of this strategy, our net cash used in operating activities decreased to $6.6 million for the first quarter of 2024, down from $10.0 million for the first three months of 2023. Concurrently, our revenues increased to $19.1 million for the first quarter of 2024 from $17.7 million for the first quarter of 2023. This increase was primarily as a result of a 13.5% increase in disposables revenue, partially offset by a 13.8% decrease in capital equipment revenue. For the three months ended March 31, 2024 and 2023, we incurred a net loss of $14.8 million and $18.1 million, respectively.

Despite our near-term challenges, we believe our anticipated long-term growth will be driven by the following strengths:

•Disruptive High Velocity Therapy technology supported by a compelling body of clinical and economic evidence;

•Expanded FDA indications we received for our next generation HVT 2.0 platform, enabling use in multiple settings of care, and anticipated higher average selling prices as a result;

•Deep expertise in the area of closed loop control, the first example of which is our OAM;

•New FDA clearances and/or approvals for our product pipeline, including the HVT 2.0 version of the OAM;

•A recurring revenue model with historically high visibility on our disposables utilization across a robust global installed base;

•Dedicated respiratory sales forces in the United States, and in select international markets, which we expect to extend to other growing international markets;

•Experienced international distributors;

•A comprehensive approach to market development with established clinical and digital marketing teams;

•A robust and growing intellectual property portfolio; and

•An experienced senior management team and board members with deep industry practice.

We continued to execute on our strategy to grow existing customer accounts through education of our customers on the full capabilities of our technology to help patients through all four care areas of the hospital that we serve today, regardless of whether patients are hypoxic, hypercapnic, or otherwise suffering respiratory distress. Net revenue increased $1.4 million, or 7.9%, to $19.1 million for the three months ended March 31, 2024 compared to $17.7 million for the three months ended March 31, 2023. Revenue from single-use disposables represented approximately 73.7% of our net revenue for the three months ended March 31, 2024 and increased 13.5% over the three months ended March 31, 2023. We believe our strategy will allow us to return our disposables utilization, or turn, rates to their pre-COVID-19 historical levels over time as we go deeper and wider in our largest accounts. The turn rate is the average number of disposables purchased per month per capital unit from a customer account. We continue to focus on our long-term product roadmap, under which we plan to introduce additional high growth products to our respiratory care offerings, which we expect to drive higher average selling prices as we introduce new higher-value products and services. In March 2024, we unveiled our Access365 home ventilation solution at the annual MEDTRADE conference in Dallas, Texas. Access365 is designed to provide optimal treatment at home, especially for COPD patients, by combining the known benefits of nocturnal NIV with the comfort of high velocity therapy for daytime use. The device is designed to reduce hospital readmissions, improve patient quality of life, and reduce healthcare equipment costs for late-stage hypercapnic COPD patients. In addition to ventilation-assured pressure support and volume control/assist ventilation modes and Vapotherm's proven high velocity therapy, the ventilator incorporates a built-in medical grade humidifier and integrated Bluetooth pulse oximetry and spirometry. The Access365 home ventilation solution also includes cloud connectivity to enable remote data retrieval and system upgrades and a patient engagement platform designed to break the cycle of symptom exacerbation and readmission through early identification of worsening symptoms allowing more rapid clinical intervention. This proprietary algorithm resulted in up to a 41% reduction in late-stage COPD hospital readmissions. We anticipate receiving FDA clearance for Access365 in 2025.

Despite our current cost savings initiatives, we expect to continue to make investments in research and development, regulatory affairs, and clinical studies to develop future generations of our High Velocity Therapy products which historically have driven higher average selling prices of our products, support regulatory submissions, and demonstrate the clinical efficacy of our new products. While these and other actions have historically put pressure on our margins and adversely affected our financial performance, we anticipate long-term benefits of these past and anticipated future actions, including lower cost products being built in

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our Mexico facility to drive gross margin improvements. Because of these and other factors, we expect to continue to incur net losses for the next several years and will require additional funding, which could include equity and/or debt financings.

Based on our recurring losses, current financial forecasts and our continuing noncompliance with the minimum liquidity covenant of $5.0 million (the “Liquidity Covenant”), we believe our existing cash resources and borrowing capacity under our loan agreement, anticipated cash receipts from sales of our products and monetization of our existing inventory balances will not be sufficient to meet our anticipated cash requirements during the next 12 months, which raises substantial doubt about our ability to continue as a going concern. Given our continuing noncompliance with the Liquidity Covenant, our term loans under our loan agreement have become puttable at the sole discretion of our lender. As of the date this Quarterly Report on Form 10-Q is filed, our lender has not declared us in default on the Liquidity Covenant. To ensure adequate liquidity, we are in discussions with our lender about restructuring our debt and evaluating various external financing options, although no assurance can be provided that we will be successful in restructuring our debt or securing additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This is particularly true if economic and market conditions deteriorate or if our business deteriorates. We believe our relationship with our lender is good. If we are unable to obtain additional financing, we would be required to curtail operations significantly, including reducing our operating expenses which, in turn, would negatively impact our sales, or even cease operations. Any debt restructuring or additional financing that we raise may contain terms that are not favorable to us and be dilutive to our stockholders. As a result, substantial doubt exists about our ability to continue as a going concern.

To retain and incentive our key contributors and employees while preserving cash resources and without incurring stock dilution from significant additional equity issuances, our Board of Directors on February 26, 2024 approved a stock option repricing, effective February 27, 2024, resulting in the exercise price of all outstanding options to purchase shares of our common stock, other than options held by non-employee Board members, being reduced to $0.915 per share, the closing price of our common stock on February 27, 2024, which resulted in the recognition of additional compensation expense of $0.1 million during the three months ended March 31, 2024.

Results of Operations

	Three Months Ended March 31,
	2024			2023
	(in thousands)
Net revenue	$	19,134		$	17,731
Cost of revenue		9,477			11,519
Gross profit		9,657			6,212
Operating expenses
Research and development		3,632			3,987
Sales and marketing		7,142			9,592
General and administrative		4,472			5,770
Impairment of right-of-use assets		-			432
Loss on disposal of property and equipment		(8	)		55
Total operating expenses		15,238			19,836
Loss from operations		(5,581	)		(13,624	)
Other expense, net		(9,244	)		(4,457	)
Net loss before income taxes		(14,825	)		(18,081	)
Provision for income taxes		11			9
Net loss	$	(14,836	)	$	(18,090	)

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Revenue

	Three Months Ended March 31,
	2024					2023					Change
	(in thousands, except percentages)
	Amount		% of Revenue			Amount		% of Revenue			$			%
Product revenue:
Capital equipment	$	2,853		14.9	%	$	3,308		18.7	%	$	(455	)		(13.8	)%
Disposables		14,096		73.7	%		12,417		70.0	%		1,679			13.5	%
Subtotal product revenue		16,949		88.6	%		15,725		88.7	%		1,224			7.8	%
Lease revenue
Capital equipment	$	211		1.1	%	$	130		0.7	%	$	81			62.3	%
Other		483		2.5	%		463		2.6	%		20			4.3	%
Service and other revenue		1,491		7.8	%		1,413		8.0	%		78			5.5	%
Total net revenue	$	19,134		100.0	%	$	17,731		100.0	%	$	1,403			7.9	%

Net revenue increased $1.4 million, or 7.9%, to $19.1 million for the first quarter of 2024 compared to $17.7 million for the first quarter of 2023. The increase in net revenue was primarily attributable to an increase of $1.7 million in disposables revenue, partially offset by a decrease of $0.5 million in capital equipment revenue. Disposables revenue increased 13.5% in the first quarter of 2024 primarily due to an increase in the number of disposables sold in the United States and higher average selling prices. Capital equipment revenue decreased 13.8% in the first quarter of 2024 due to a decrease in the volume of sales of capital equipment in the United States.

Net revenue information by geography is summarized as follows:

	Three Months Ended March 31,
	2024					2023					Change
	(in thousands, except percentages)
	Amount		% of Revenue			Amount		% of Revenue			$			%
United States	$	15,084		78.8	%	$	13,014		73.4	%	$	2,070			15.9	%
International		4,050		21.2	%		4,717		26.6	%		(667	)		(14.1	)%
Total net revenue	$	19,134		100.0	%	$	17,731		100.0	%	$	1,403			7.9	%

Net revenue generated in the United States increased $2.1 million, or 15.9%, to $15.1 million for the first quarter of 2024, compared to $13.0 million for the first quarter of 2023. Net revenue generated in our International markets decreased $0.7 million, or 14.1%, to $4.1 million for the first quarter of 2024, compared to $4.7 million for the first quarter of 2023. The increase in net revenue in the United States was primarily the result of an increase in the number of disposables sold over the prior year period. The decrease in net revenue in our International markets was primarily due a decrease in the number of disposables sold over the prior year period and a higher mix of Precision Flow systems sold in our International markets, which carry lower average selling prices than the HVT 2.0 system.

Cost of Revenue and Gross Profit

Cost of revenue decreased $2.0 million, or 17.7%, to $9.5 million in the first quarter of 2024 compared to $11.5 million in the first quarter of 2023. Gross profit as a percent of revenue increased to 50.5% in the first quarter of 2024 compared to 35.0% in the first quarter of 2023. The decrease in cost of revenue and increase in gross profit were primarily due to an increase in net revenue and improved efficiency of our facility in Mexico resulting in lower production costs.

Research and Development Expenses

Research and development expenses decreased $0.4 million, or 8.9%, to $3.6 million in the first quarter of 2024 compared to $4.0 million in the first quarter of 2023. As a percentage of revenue, research and development expenses decreased to 19.0% in the first quarter of 2024 compared to 22.5% in the first quarter of 2023.

The decrease in research and development expenses and as a percentage of net revenue was primarily due to cost reductions from our path-to-profitability initiatives consisting of decreased employee-related expenses and stock-based compensation, partially offset by increased development costs related to our Access365 home ventilation solution. The decrease was also due to the capitalization of certain software development costs that did not qualify for capitalization in the prior year period. The decrease in

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research and development expenses as a percentage of revenue for the first quarter of 2024 was also due to an increase in net revenue during the same period.

Sales and Marketing Expenses

Sales and marketing expenses decreased $2.5 million, or 25.5%, to $7.1 million in the first quarter of 2024 compared to $9.6 million in the first quarter of 2023. As a percentage of revenue, sales and marketing expenses decreased to 37.3% in the first quarter of 2024 compared to 54.1% in the first quarter of 2023.

The decrease in sales and marketing expenses and as a percentage of net revenue was primarily due to cost reductions from our path-to-profitability initiatives consisting of decreased employee-related expenses, stock-based compensation, national sales meeting expenses, third-party consulting costs, and travel expenses. The decrease in sales and marketing expenses as a percentage of revenue for the first quarter of 2024 was also due to an increase in net revenue during the same period.

General and Administrative Expenses

General and administrative expenses decreased $1.3 million, or 22.5%, to $4.5 million in the first quarter of 2024 compared to $5.8 million in the first quarter of 2023. As a percentage of revenue, general and administrative expenses decreased to 23.4% in the first quarter of 2024 compared to 32.5% in the first quarter of 2023.

The decrease in general and administrative expenses and as a percentage of net revenue was primarily due to cost reductions from our path-to-profitability initiatives consisting of decreased stock-based compensation, employee-related expenses, non-cash lease expense, and consulting and legal expenses. The decrease in general and administrative expenses as a percentage of revenue for the first quarter of 2024 was also due to an increase in net revenue during the same period.

Impairment of Right-of-Use Assets

There were no impairments of right-of-use assets during the first quarter of 2024. Impairment of right-of-use assets totaled $0.4 million during the first quarter 2023 and related to the write down of operating lease right-of-use assets no longer deemed to be recoverable.

Gain (Loss) on Disposal of Property and Equipment

We recorded a gain on disposal of certain property and equipment of less than $0.1 million during the first quarter of 2024. We recorded a loss on disposal of certain property and equipment of $0.1 million during the first quarter of 2023.

Other Expense, Net

Other expense, net increased $4.8 million, or 107.4%, to $9.2 million in the first quarter of 2024 compared to $4.5 million in the first quarter of 2023. The increase in other expense, net was primarily due to an increase in non-cash interest expense from an accrual of the exit fee related to our loan agreement. The increase is also attributable to higher average interest rates on higher average outstanding borrowings in the current year period compared to the prior year period.

Provision for Income Taxes

The provision for income taxes for the first quarter of 2024 and 2023 each totaled less than $0.1 million and, in each case, related to income earned by our foreign subsidiaries after accounting for transfer pricing adjustments.

Liquidity and Capital Resources

As of March 31, 2024, we had cash, cash equivalents and restricted cash of $4.4 million, negative working capital of $96.4 million and an accumulated deficit of $563.0 million. Our primary sources of capital to date have been from sales of our equity securities, sales of our High Velocity Therapy systems and their associated disposables and amounts borrowed under credit facilities. Since inception, we have raised a total of $393.9 million in net proceeds from sales of our equity securities.

On February 10, 2023, we issued in a private placement an aggregate of 2,187,781 shares of common stock, and in the case of certain investors, in lieu of shares of common stock, pre-funded warrants to purchase an aggregate of 550,313 shares of common stock, and, in each case, accompanying warrants to purchase an aggregate of up to 2,738,094 shares of common stock at a purchase

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price of $8.40 per unit for aggregate gross proceeds to us of approximately $23.0 million, before deducting fees to the placement agent and other offering expenses of $2.1 million. The warrants and pre-funded warrants have exercise prices of $9.36 and $0.008 per share and expire in five years and 30 years, respectively. The net proceeds from the offering are being used primarily for sales and marketing, working capital, and other general corporate purposes.

Based on our recurring losses, current financial forecasts and our continuing noncompliance with the Liquidity Covenant, we believe our existing cash resources and borrowing capacity under our loan agreement, anticipated cash receipts from sales of our products and monetization of our existing inventory balances will not be sufficient to meet our anticipated cash requirements during the next 12 months, which raises substantial doubt about our ability to continue as a going concern. Given our continuing noncompliance with the Liquidity Covenant, our term loans under our loan agreement have become puttable at the sole discretion of our lender. As of the date this Quarterly Report on Form 10-Q is filed, our lender has not declared us in default on the Liquidity Covenant. To ensure adequate liquidity, we are in discussions with our lender about restructuring our debt and evaluating various external financing options, although no assurance can be provided that we will be successful in restructuring our debt or securing additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. Any such transaction or restructuring could be dilutive to existing stockholders. In addition, on March 26, 2024 (the “Seventh Amendment Effective Date”), we entered into an amendment to our loan agreement while we evaluate our debt restructuring and financing options. This amendment provided for a $4.0 million term B facility and extends our option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period from March 1, 2024 through April 30, 2024 with an additional extension to include interest accruing through May 31, 2024 at the sole discretion of our lender, see Note 7 “Debt” to our consolidated financial statements in this Quarterly Report on Form 10-Q. On the Seventh Amendment Effective Date, $2.0 million was funded to us. On April 26, 2024, an additional $1.0 million was funded to us under the Term B Loan Facility. We believe our relationship with our lender is good. Since these restructuring and financing options are not considered probable under current accounting standards, they are not considered in the evaluation of available resources. There is inherent uncertainty associated with fundraising activity and it is not in our complete control. If we are unable to restructure our debt and/or obtain additional financing we would be required to curtail operations significantly, including reducing our operating expenses which, in turn, would negatively impact our sales, or even cease operations. Any debt restructuring or additional financing that we raise may contain terms that are not favorable to us or our stockholders and could result in additional dilution. As a result, substantial doubt exists about our ability to continue as a going concern within one year after the date that this Quarterly Report on Form 10-Q is filed. See Note 1 “Description of Business” to our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Cash Flows

The following table presents a summary of our cash flows for the periods indicated:

	Three Months Ended March 31,
	2024			2023
	(in thousands)
Net cash provided by (used in):
Operating activities	$	(6,557	)	$	(10,034	)
Investing activities		(1,410	)		(1,004	)
Financing activities		1,671			20,943
Effect of exchange rate on cash, cash equivalents and restricted cash		(125	)		70
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(6,421	)	$	9,975

Operating Activities

The net cash used in operating activities was $6.6 million in the first quarter of 2024 and consisted primarily of a net loss of $14.8 million and an increase in net operating assets of $2.9 million, partially offset by non-cash charges of $11.1 million. Non-cash charges for the first quarter of 2024 consisted primarily of non-cash interest expense, stock-based compensation expense, interest paid in-kind, depreciation and amortization expense.

The net cash used in operating activities was $10.0 million in the first quarter of 2023 and consisted primarily of a net loss of $18.1 million and an increase in net operating assets of $0.4 million, partially offset by non-cash charges of $8.5 million. Non-cash charges for the first quarter of 2023 consisted primarily of stock-based compensation expense, interest paid in-kind, depreciation and amortization expense, and impairment of right-of-use assets.

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Investing Activities

Net cash used in investing activities for the first quarter of 2024 and 2023 consisted of purchases of property and equipment of $1.4 million and $1.0 million, respectively.

Financing Activities

Net cash provided by financing activities was $1.7 million in the first quarter of 2024 and consisted of net proceeds under our credit facility of $1.9 million, partially offset by payment of debt issuance costs of $0.2 million.

Net cash used in financing activities was $20.9 million in the first quarter of 2023 and consisted of net proceeds from the issuance of securities in the February 2023 private placement.

Credit Facilities

On February 18, 2022 (the “Effective Date”), we entered into the SLR Loan Agreement with SLR Investment Corp. (“SLR”) which provided for a term A loan facility of $100.0 million (the “Term A Loan Facility”). The Term A Loan Facility was funded to us on the Effective Date. In connection with this funding, we issued SLR warrants to purchase 13,421 shares of our common stock at an exercise price of $111.76 per share, which were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and expire in February 2032. The proceeds of the Term A Loan Facility were used to repay all indebtedness under our prior loan agreement with CIBC.

On November 22, 2022 (the “Third Amendment Effective Date”), we entered into an Amendment No. 3 to the SLR Loan Agreement (the “Third Amendment,” together with SLR Loan Agreement, as amended prior to the Third Amendment Effective Date, the “Third Amended SLR Loan Agreement”) with SLR. Pursuant to the Third Amendment:

•our minimum net product revenue covenant was modified for 2023;

•the minimum liquidity covenant was reduced to $5 million from $20 million; and

•an option was added, at our sole discretion, to pay up to 8% of the interest under the Third Amended SLR Loan Agreement in-kind (rather than solely in cash as provided for prior to the Third Amendment Effective Date) during 2023 (the “PIK Interest”), subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to the lenders equal to 5% of the PIK Interest.

On February 10, 2023 (the “Fourth Amendment Effective Date”), we entered into an Amendment No. 4 to the SLR Loan Agreement (the “Fourth Amendment,” together with the Third Amended SLR Loan Agreement, the “Fourth Amended SLR Loan Agreement”) with SLR. The Fourth Amendment includes the option for us to pay up to 9% of the interest in-kind (rather than up to 8% as provided for prior to the Fourth Amendment Effective Date) during 2023.

Additionally, if we elect PIK Interest of 9%, the amount of warrants to be issued to SLR increases to be 5% times the amount of PIK Interest for the first 4% of the PIK Interest selected and 12.20% times on the next 5% of the amount of PIK Interest selected to provide for a weighted average of 9%, and our monthly interest expense increases by 1% for the month in which such PIK Interest is selected. The Fourth Amendment also provided for a reset of the exercise price of the warrants to be issued in connection with our election of PIK Interest, including existing PIK Warrants, equal to the lower of our closing stock price for (a) the 10-day trailing average closing price ending on the day before the interest payment date, (b) the day before the interest payment date, or (c) $9.36 per share.

On April 17, 2023, we entered into an Amendment No. 5 to the SLR Loan Agreement (the “Fifth Amendment,” together with the Fourth Amended SLR Loan Agreement, the “Fifth Amended SLR Loan Agreement”) with SLR to exclude our Singapore subsidiary operating account from the requirement of a control agreement in favor of SLR, provided the account balance is the lower of (i) $250,000 or (ii) the amount required to fund expenditures therefrom within the next ten business days. The Fifth Amendment also contains other customary provisions, such as expense reimbursement.

On February 21, 2024, we entered into an Amendment No. 6 to the SLR Loan Agreement (the “Sixth Amendment,” together with the Fifth Amended SLR Loan Agreement, the “Sixth Amended SLR Loan Agreement”) with SLR to extend our option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period January 1, 2024 through February 29,

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2024, subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to equal 9% of the PIK Interest.

On March 26, 2024 (the “Seventh Amendment Effective Date”), we entered into an Amendment No. 7 to the SLR Loan Agreement (the “Seventh Amendment,” together with the Sixth Amended SLR Loan Agreement, the “Seventh Amended SLR Loan Agreement”) with SLR. The Seventh Amendment established a term B loan facility of $4.0 million (the “Term B Loan Facility”). Borrowings under the Term B Loan Facility are available from the Seventh Amendment Effective Date until July 26, 2024 (the “Term B Maturity Date”) and shall be conditioned on approval by the lenders’ investment committee in its sole discretion. On the Seventh Amendment Effective Date, $2.0 million was funded to us. On April 26, 2024, an additional $1.0 million was funded to us under the Term B Loan Facility. The Term B Loan Facility provides for interest-only payments and aggregate principal outstanding shall be due and payable on the Term B Maturity Date. We will be required to make a payment of 0.2% of the aggregate principal amount of the Term B Loan Facility funded (the “Term B Facility Exit Fee”), which is payable on the earliest to occur of (i) the Term B Maturity Date, (ii) the acceleration of the Seventh Amended SLR Loan Agreement prior to the Term B Maturity Date, and (iii) the prepayment date of the Seventh Amended SLR Loan Agreement prior to the Term B Maturity Date. The Term B Facility Exit Fee of less than $0.1 million is considered fully earned by SLR as of the Seventh Amendment Effective Date and has been fully accrued as of March 31, 2024 due to the Company’s continuing noncompliance with the Liquidity Covenant. In addition, the Seventh Amendment extended our option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period from March 1, 2024 through April 30, 2024 with an additional extension to include interest accruing through May 31, 2024 at the sole discretion of SLR. The PIK Interest extension is subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to equal to 9% of the PIK Interest.

Pursuant to the Seventh Amended SLR Loan Agreement, advances under the Term A Loan Facility bear interest at a floating rate per annum equal to (a) the greater of (i) 1.00% or (ii) the 1-month Chicago Mercantile Exchange (“CME”) Term Secured Overnight Financing Rate (“SOFR”) plus 0.10%, plus (b) (i) 8.30% under a PIK Interest option of 4% or 0%, or (ii) 9.30% under a PIK Interest option of 9%. Advances under the Term B Loan Facility bear interest at a floating rate per annum equal to the sum of (a) 0.10%, plus (b) 8.30% plus (c) the 1-month CME Term SOFR plus 0.10%. At March 31, 2024, the interest rate under the Term A Loan Facility and Term B Loan Facility was 14.72% and 13.82%, respectively. We paid interest in-kind on the Term A Loan Facility totaling $2.5 million and $2.1 million during the three months ended March 31, 2024 and 2023, respectively. The outstanding balance under the Term A Loan Facility and Term B Loan Facility was $111.8 million and $2.0 million, respectively, at March 31, 2024. The Term A Loan Facility provides for interest-only payments for the first 48 months following the Effective Date. Thereafter, principal payments on the Term A Loan Facility are due monthly in 12 equal installments; provided that we have the option to extend the interest-only period for an additional 12 months upon achievement of a certain minimum revenue level as more fully described in the Seventh Amended SLR Loan Agreement. The Term A Facility will mature on February 1, 2027 (the “Term A Maturity Date”). The Seventh Amended SLR Loan Agreement may be prepaid in full, subject to a prepayment charge of 1.0%, if such prepayment occurs after February 18, 2024 but on or prior to the Term A Maturity Date (the “Prepayment Penalty”). In addition to the payment of principal and accrued interest, we will be required to make a payment of 7.45% of the aggregate principal amount of the Term A Loan Facility funded (the “Term A Facility Exit Fee”), which is payable on the earliest to occur of (i) the Term A Maturity Date, (ii) the acceleration of the Seventh Amended SLR Loan Agreement prior to the Term A Maturity Date, and (iii) the prepayment date of the Seventh Amended SLR Loan Agreement prior to the Term A Maturity Date. The Term A Facility Exit Fee of $7.5 million is considered fully earned by SLR as of the Effective Date and has been fully accrued as of March 31, 2024 due to our continuing noncompliance with the Liquidity Covenant. In connection with the Seventh Amended SLR Loan Agreement, we have incurred direct financing costs related to fees and non-cash consideration paid to SLR and fees paid to third parties of $2.2 million and $1.6 million, respectively, as of March 31, 2024. The Seventh Amended SLR Loan Agreement is secured by a lien on substantially all of the assets, including our intellectual property.

The Seventh Amended SLR Loan Agreement contains customary covenants and representations, including, without limitation, a minimum revenue covenant equal to a percentage of each month’s forecasted net product revenue as defined in the Seventh Amended SLR Loan Agreement (tested on a trailing six month basis at the end of each fiscal month, commencing with the six month period ending on August 31, 2022), the Liquidity Covenant, and other financial covenants, reporting obligations, and limitations on dispositions, changes in business or ownership, mergers or acquisitions, indebtedness, encumbrances, distributions and investments, transactions with affiliates and capital expenditures. As of March 31, 2024, we were not in compliance with the Liquidity Covenant as our unrestricted cash balance was less than $5.0 million. As the Seventh Amended SLR Loan Agreement is considered callable at the sole discretion of SLR, the outstanding principal is presented as a current liability on the condensed consolidated balance sheet at March 31, 2024 on this Quarterly Report on Form 10-Q. In addition, the Term A Facility Exit Fee and Term B Facility Exit Fee have been fully accrued as of March 31, 2024 as a component of accrued expenses and other current liabilities. We were in compliance with all other financial covenants under the Seventh Amended SLR Loan Agreement at March 31, 2024.

The events of default under the Seventh Amended SLR Loan Agreement include, without limitation, and subject to customary grace periods, (1) our failure to make any payments of principal or interest under the Seventh Amended SLR Loan

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Agreement or any other loan documents, (2) our breach or default in the performance of any covenant under the Seventh Amended SLR Loan Agreement, (3) the occurrence of a material adverse effect or an event that is reasonably likely to result in a material adverse effect, (4) the existence of an attachment or levy on a material portion of our funds or of our subsidiaries, (5) our insolvency or bankruptcy, or (6) the occurrence of certain material defaults with respect to any other of our indebtedness in excess of $500,000. If an event of default occurs, SLR is entitled to take enforcement action, including an incremental 5% interest rate increase or acceleration of amounts due under the Seventh Amended SLR Loan Agreement (the “Mandatory Prepayment Option”). We determined the Mandatory Prepayment Option to be an embedded derivative that is required to be bifurcated from the Seventh Amended SLR Loan Agreement. We determined the probability of SLR exercising the Mandatory Prepayment Option due to our continuing noncompliance with the Liquidity Covenant to be remote and deemed its fair value to be immaterial as of March 31, 2024. We re-evaluate the fair value of the Mandatory Prepayment Option at the end of each reporting period.

The Seventh Amended SLR Loan Agreement also contains other customary provisions, such as expense reimbursement and confidentiality. SLR has indemnification rights and the right to assign the Seventh Amended SLR Loan Agreement, subject to customary restrictions.

Critical Accounting Policies and Practices

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. Management believes that such estimates have been based on reasonable and supportable assumptions and the resulting estimates are reasonable for use in the preparation of the condensed consolidated financial statements. Actual results could differ from these estimates.

Critical accounting policies are defined as those that are reflective of significant judgements and uncertainties, the most important and pervasive accounting policies used and areas most sensitive to material changes from external factors. We determined there were no critical accounting estimates included in our consolidated financial statements that involve a significant level of uncertainty as of December 31, 2023 or March 31, 2024.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to interest rate risk arises primarily from variable interest rates applicable to borrowings under our Seventh Amended SLR Loan Agreement and interest rates associated with our invested cash balances. Borrowings under our Seventh Amended SLR Loan Agreement bear interest at a floating rate per annum equal to (a) the greater of (i) 1.00% or (ii) the one month Secured Overnight Financing Rate (the “SOFR Rate”), plus (b) (i) 8.30% under a PIK Interest option of 4% or 0%, or (ii) 9.30% under a PIK Interest option of 9%. At March 31, 2024, the interest rate was 14.72%. As of March 31, 2024, borrowings under our Fifth Amended SLR Loan Agreement totaled $113.8 million. Based on our outstanding borrowings and the SOFR Rate, a 100 basis point increase in the annual interest rate on our outstanding borrowings would have a $1.1 million impact on our interest expense on an annual basis.

On March 31, 2024, we had cash invested in money market deposits of less than a $0.1 million. We believe that a 10 basis point change in interest rates is reasonably possible in the near term. Certain of our cash and cash equivalents balances are exposed to credit loss for the amounts that exceed FDIC insured limits. We place our cash and cash equivalents in what we believe to be credit-worthy financial institutions. Based on our current level of cash investments, an increase or decrease of 10 basis points in interest rates would have less than a $0.1 million impact to our interest income on an annual basis.

Foreign Currency Risk

For our non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange as of the balance sheet date. In addition, we engage in other foreign operations that transact in currencies other than the U.S. dollar. Our principal exchange rate risk is between the U.S. dollar, the British pound sterling and the Mexican peso, and to a lesser extent, the euro, and the Singapore dollar. Adjustments resulting from the translation of the financial statements of our non-U.S. subsidiaries’ foreign operations into U.S. dollars are excluded from the determination of net loss and are recorded in accumulated other comprehensive income (loss), a separate component of stockholders’ deficit. Income and expense items are translated at the average foreign currency exchange rates for the period. Transaction gains and losses resulting from currency fluctuations related to our other foreign operations are included in the determination of our net loss. As a result, our financial condition and operating results are affected by fluctuations in the value of the U.S. dollar as compared to the British pound sterling and the Mexican peso, and to a lesser extent, the euro, and the Singapore dollar. Revenue denominated in currencies other than the U.S. dollar represented approximately 7.3% and 7.8% of consolidated net revenue for the quarters ended March 31, 2024 and 2023, respectively. Total assets denominated in currencies other than the U.S. dollar represented approximately 7.5% and 8.3% of our total assets at March 31, 2024 and December 31, 2023, respectively. There were no material assets denominated in the Mexican peso at March 31, 2024 or December 31, 2023. Given the immateriality of net revenues and assets denominated in currencies other than the U.S. dollar, a 10% fluctuation in exchange rates would have an immaterial impact to our consolidated net revenues and consolidated total assets. We do not use foreign exchange contracts or derivatives to hedge any foreign currency exposures.

Inflation Risk

Many of the commodities used in the production and transportation of our products are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of purchase orders and pricing agreements. During the quarter ended March 31, 2024, we continued to experience inflationary pressures on transportation and commodities costs, which we expect to continue during 2024. A number of external factors, including adverse weather conditions, supply chain disruptions (including raw material shortages) and labor shortages, have impacted and may continue to impact transportation and commodities costs. When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins and operating results.

Concentration of Credit Risk

Financial instruments that potentially expose us to concentration of credit risk consist primarily of cash, cash equivalents and restricted cash. We maintain our cash balances primarily with Canadian Imperial Bank of Commerce Innovation Banking and Bank of America, N.A. These balances generally exceed FDIC limits. We have not experienced any losses in such accounts and believe we are not exposed to any significant credit risk in cash, cash equivalents and restricted cash.

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ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

(b)Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company may become involved in various legal proceedings, including those that may arise in the ordinary course of business. The Company believes there is currently no litigation pending that could have, individually, or in the aggregate, a material adverse effect on the results of its operations or financial condition.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our 2023 Form 10-K which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors previously disclosed in the “Risk Factors” section of our Annual Report on Form 10-K filed with the SEC on February 22, 2024.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the first quarter of 2024, the Company issued SLR Investment Corp. (“SLR”) warrants to purchase an aggregate of 79,146 shares of common stock in connection with the PIK Interest option under the Company’s Loan and Security Agreement, as amended, with SLR (collectively, the “PIK Warrants”). The PIK Warrants have an exercise price of $0.96 per share, were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and have an expiration date of January 2, 2034. The offer and sale of the PIK Warrants was made by the Company in reliance on an exemption from the registration requirements provided under Section 4(a)(2) of the Securities Act of 1933, as amended, and in connection therewith, relied upon representations made by SLR.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications

During the three months ended March 31, 2024, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of SEC Regulation S-K.

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ITEM 6. EXHIBITS

The following exhibits are either being filed or furnished with this Quarterly Report on Form 8-K or incorporated herein by reference:

Exhibit Number	Description
4.1	Form of Warrant to Purchase Common Stock of Vapotherm, Inc. Issued to SLR Investment Corp. as Payment in Kind Interest under Loan and Security Agreement (filed herewith)
10.1	Vapotherm, Inc. Amended and Restated 2018 Equity Incentive Plan (previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed on February 27, 2024 (File No. 001-38740) and incorporated herein by reference
10.2	Amendment No. 7 to Loan and Security Agreement, dated as of March 26, 2024, among Vapotherm, Inc., SLR Investment Corp., as Collateral Agent, and the Lenders Party Thereto (previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed on April 1, 2024 (File No. 001-38740) and incorporated herein by reference
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS	Inline XBRL Instance Document (the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document with Embedded Linkbase Documents (filed herewith)
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VAPOTHERM, INC.
May 9, 2024	By:	/s/ Joseph Army
		Joseph Army
		President and Chief Executive Officer

May 9, 2024	By:	/s/ John Landry
		John Landry
		Senior Vice President and Chief Financial Officer

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EX-4.1

Exhibit 4.1

FINAL

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.5 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

WARRANT TO PURCHASE STOCK

Company: Vapotherm, Inc., a Delaware corporation

Type/Series of Stock: Common Stock of the Company (“Common Stock”)

Number of Shares: [•]

Warrant Price: $[•] per share

Issue Date: [•]

Expiration Date: [•] (See also Section 5.1(b))

Credit Facility: This Warrant to Purchase Stock (“Warrant”) is issued in connection with that certain Loan and Security Agreement, dated as of February 18, 2022, among SLR Investment Corp., a Maryland corporation with an office located at 500 Park Avenue, 3rd Floor, New York, NY (“SLR”), as collateral agent, the lenders party thereto from time to time including SLR in its capacity as a lender, the Company, HGE Health Care Solutions, LLC, a Delaware limited liability company, Vapotherm Access Care Management Network, LLC, a Delaware limited liability company, and Vapotherm Access Management Services, LLC, an Oklahoma limited liability company (as amended, restated, or otherwise modified from time to time, the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, [•] (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase the number of fully paid and non-assessable shares (the “Shares”) of the above-stated Type/Series of Stock (the “Class”) of the above-named company (the “Company”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to SECTION 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

SECTION 1EXERCISE.

1.1Method of Exercise.

(a)Holder may at any time and from time to time through the Expiration Date exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant

together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

(b)Delivery of Shares Upon Exercise. As promptly as practicable after the Company receives the duly executed Notice of Exercise and payment of the Warrant Price for the exercised Shares in the manner set forth in Section 1.1 or 1.2 of this Warrant, as applicable, the Company shall deliver to Holder the Shares purchased hereunder upon such exercise.

1.2Cashless Exercise. On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised in accordance with this Section 1.2 (a “Cashless Exercise”). Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares, rounded down to the nearest whole number, as are computed using the following formula:

X = Y(A-B)/A

where:

X = the number of Shares to be issued to the Holder;

Y = the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);

A = the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and

B = the Warrant Price.

1.3Fair Market Value. If the Common Stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”) and the Class is Common Stock, the fair market value of a Share shall be the closing price or last sale price of a share of Common Stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Common Stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.

1.4Delivery of New Warrant. Promptly after Holder exercises this Warrant in the manner set forth in Sections 1.1 and/or 1.2 above, if this Warrant has not been fully exercised and has not expired, the Company shall deliver to Holder a new warrant of like tenor representing the Shares not so acquired.

1.5Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement and bond reasonably satisfactory in form, substance

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and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.

1.6Treatment of Warrant Upon Acquisition of Company.

(a)Acquisition. For the purpose of this Warrant, “Acquisition” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company; (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power. For the avoidance of any doubt, an Acquisition shall not include any transaction or series of transactions principally for bona fide equity financing purposes.

(b)Treatment of Warrant at Acquisition. In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), and the fair market value of one Share as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant pursuant to Section 1.1 above as to all Shares, then this Warrant shall automatically be deemed to be Cashless Exercised pursuant to Section 1.2 above as to all Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in SECTION 4 of the Warrant as the date thereof, and the Company shall promptly notify the Holder of the amount of cash or number of securities issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire without value or payment immediately prior to the consummation of such Cash/Public Acquisition and shall no longer be exercisable.

(c)Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.

(d)As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Securities Act of 1933, as amended (the “Act”) and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or immediately following the closing thereof will be traded in a Trading Market; and (iii)

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Holder would be able to publicly re-sell, within six (6) months following the closing of such Acquisition, all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.

SECTION 2ADJUSTMENTS TO THE SHARESAND WARRANT PRICE.

2.1Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in Common Stock or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased, provided the aggregate purchase price shall remain the same. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased, provided the aggregate purchase price shall remain the same.

2.2Reclassification, Exchange, Combinations or Substitution. Upon any event, other than an Acquisition, whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, provided the aggregate purchase price shall remain the same and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, replacements or other similar events.

2.3No Fractional Share. No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (a) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (b) the then-effective Warrant Price.

2.4Notice/Certificate as to Adjustments. Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Executive Officer or Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.

SECTION 3REPRESENTATIONS AND COVENANTS OF THE COMPANY.

3.1Representations and Warranties. The Company represents and warrants to, and agrees with, the Holder as follows:

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(a)This Warrant is duly authorized and validly issued, and all shares which may be issued upon the exercise of this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any taxes, liens, charges and encumbrances except for (i) such taxes or charges that the Company is not responsible for as provided for in Section 5.8 and (ii) restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of Common Stock and other securities as will be sufficient to permit the exercise in full of this Warrant and the conversion of the Shares into Common Stock or such other securities.

(b)The Company’s capitalization as disclosed in its filings with the Commission is true and complete, in all material respects, as of the Issue Date.

(c)The Company has all requisite corporate power and authority, and has taken all requisite corporate action, to execute and deliver this Warrant, sell and issue the Shares and carry out and perform all of its obligations under this Warrant. If at any time the Company does not have a sufficient number of Shares authorized and available, then the Company shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock or other securities to such number of shares or other securities as shall be sufficient for such purposes. This Warrant constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally and (ii) as limited by equitable principles generally, including any specific performance.

(d)No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Warrant except for (i) the filing of a Form D with the Securities and Exchange Commission (the “Commission”) under the Securities Act and compliance with the securities and blue sky laws in the states and other jurisdictions in which shares of Common Stock are offered and/or sold, which compliance will be effected in accordance with such laws, (ii) the approval by the New York Stock Exchange (“NYSE”) of the listing of the Shares and (iii) the filing of one or more registration statements and all amendments thereto with the Commission.

(e)Neither the execution, delivery or performance of this Warrant by the Company nor the consummation of any of the transactions contemplated thereby (including, without limitation, the issuance and sale by the Company of the Shares) will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, (i) the charter or by-laws of the Company, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company is a party or bound or to which its or their property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its properties, except in the case of clauses (ii) and (iii) above, for any conflict, breach or violation of, or imposition that would not, individually or in the aggregate have (x) a material adverse effect on the validity or enforceability of this Warrant, (y) a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Company, or (z) a material

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adverse effect on the Company’s ability to perform in any material respect its obligations under this Warrant (any of (x), (y) or (z)) (a “Material Adverse Effect”).

(f)The Company is in compliance in all material respects with applicable NYSE continued listing requirements. To the Company’s knowledge, there are no proceedings pending or threatened against the Company relating to the continued listing of the Shares on the NYSE and the Company has not received any notice of, nor to the Company’s knowledge is there any reasonable basis for, the delisting of the Shares from the NYSE.

(g)The Company has not taken, directly or indirectly, any action designed to cause or result in, or that has constituted or that might reasonably be expected to constitute the stabilization or manipulation of the price of any securities of the Company in the fifteen days prior to the issuance of this Warrant.

3.2Notice of Certain Events. If the Company proposes at any time to:

(a)declare any dividend or distribution upon the outstanding shares of the Class or Common Stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;

(b)offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);

(c)effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class; or

(d)effect an Acquisition or to liquidate, dissolve or wind up.

then, in connection with each such event, the Company shall give Holder:

(1)at least five (5) Business Days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; and

(2)in the case of the matters referred to in (c) and (d) above at least five (5) Business Days prior written notice of the estimated date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event).

The Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

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SECTION 4REPRESENTATIONS AND WARRANTIES OF THE HOLDER.

The Holder represents and warrants to the Company as follows:

4.1Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act, and the Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2Disclosure of Information. Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

4.3Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.

4.6No Voting Rights; No Stockholder Rights. Holder, as a Holder of this Warrant, will not have any voting rights or otherwise be entitled to any other rights afforded to a stockholder of the Company, except such rights as are expressly granted herein such as notice and other rights, until the exercise of this Warrant.

4.7No Short Sales. Holder has not at any time on or prior to the Issue Date engaged in any short sales or equivalent transactions in the Common Stock. Holder agrees that at all times from and after the Issue Date and on or before the expiration or earlier termination of this Warrant, it shall not engage in any short sales or equivalent transactions in the Common Stock.

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SECTION 5MISCELLANEOUS.

5.1Expiration.

(a)Term and Automatic Conversion Upon Expiration. Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 P.M. Pacific time, on the Expiration Date and shall be void thereafter.

(b)Automatic Cashless Exercise upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.

5.2Legends. The Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO [•] DATED [•], MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

5.3Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). Upon any assignment of the Warrant (other than to an affiliate of the Holder), the Holder and assignee shall complete an assignment in the form attached hereto as Appendix 2.

5.4No Impairment; Further Assurances. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger or dissolution, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by Holder in order to protect the exercise privilege of Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant. The Company will not increase the par value of any Shares above the Warrant Price then in effect, and will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Shares upon the exercise of this Warrant.

8

5.5Transfer Procedure. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and providedfurther, that any subsequent transferee shall be deemed to make to the Company each of the representations and warranties set forth in SECTION 4 as of the date of such transfer and be bound by all of the terms and conditions of this Warrant.

5.6[Reserved.]

5.7Binding on Successors. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets.

5.8Taxes. The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issuance or delivery of the Shares, other than any tax or other charge imposed in connection with any transfer involved in the issue and delivery of the Shares in a name other than that of the Holder.

5.9Notices. All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.9. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

[•]

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

VAPOTHERM, INC.
100 Domain Drive

Exeter, NH 03833

Attn: John Landry, VP & CFO

Fax: (603) 658-0181

Email: jlandry@vtherm.com

5.10Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

9

5.11Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.

5.12Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of law principles that would result in the application of any other than the laws of the State of New York.

5.13Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.

5.14Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

5.15Business Days. “Business Day” is any day that is not a Saturday, Sunday or a day on which banks in the State of New York are closed.

[Signature page follows]

10

IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.

“COMPANY”

VAPOTHERM, INC.

By:_________________________________

Name: John Landry

Title: SVP & CFO

Signature Page to Warrant to Purchase Stock

“HOLDER”

[•]

By:_________________________________

Name:

Title:

Signature Page to Warrant to Purchase Stock

APPENDIX 1

NOTICE OF EXERCISE

1. The undersigned Holder hereby exercises its right purchase ___________ shares of the Common Stock of Vapotherm, Inc. (the “Company”) in accordance with the attached Warrant to Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:

[ ] check in the amount of $________ payable to order of the Company enclosed herewith

[ ] Wire transfer of immediately available funds to the Company’s account

[ ] Cashless Exercise pursuant to Section 1.2 of the Warrant

[ ] Other [Describe] __________________________________________

2. Please issue a certificate or certificates representing the Shares in the name specified below:

___________________________________________
Holder’s Name

___________________________________________

___________________________________________
(Address)

3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in SECTION 4 of the Warrant to Purchase Stock as of the date hereof.

HOLDER:

_________________________

By:_________________________

Name:________________________

Title:_________________________

(Date):_______________________

Appendix 1

APPENDIX 2

ASSIGNMENT

For value received, [•] hereby sells, assigns and transfers unto

Name:

Address:

Tax ID:

that certain Warrant to Purchase Stock issued by Vapotherm, Inc. (the “Company”) on [•] (the “Warrant”) together with all rights, title and interest therein.

[•]

By:_________________________

Name:________________________

Title:_________________________

Date:_______________________

By its execution below, and for the benefit of the Company, [SLR TRANSFEREE] makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

[SLR TRANSFEREE]

By:_________________________

Name:________________________

Title:_________________________

Date:_______________________

Appendix 2

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph Army, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Vapotherm, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ JOSEPH ARMY

Joseph Army

President and Chief Executive Officer

(Principal Executive Officer)

Date: May 9, 2024

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Landry, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Vapotherm, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ JOHN LANDRY

John Landry

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: May 9, 2024

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 of Vapotherm, Inc. (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Joseph Army, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report.

/s/ JOSEPH ARMY

Joseph Army

President and Chief Executive Officer

(Principal Executive Officer)

Date: May 9, 2024

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 of Vapotherm, Inc. (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, John Landry, Senior Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Report.

/s/ JOHN LANDRY

John Landry

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: May 9, 2024

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2024	May 02, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Document Period End Date	Mar. 31, 2024
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Entity Registrant Name	Vapotherm, Inc.
Entity Central Index Key	0001253176
Entity Tax Identification Number	46-2259298
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity File Number	001-38740
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	100 Domain Drive
Entity Address, City or Town	Exeter
Entity Address, State or Province	NH
Entity Address, Postal Zip Code	03833
City Area Code	603
Local Phone Number	658-0011
Entity Common Stock, Shares Outstanding		6,215,192

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets
Cash and cash equivalents	$ 3,304	$ 9,725
Accounts receivable, net of expected credit losses of $229 and $160, respectively	10,203	10,672
Inventories, net	24,063	22,968
Prepaid expenses and other current assets	3,844	3,058
Total current assets	41,414	46,423
Property and equipment, net	23,313	23,703
Operating lease right-of-use assets	3,136	3,372
Restricted cash	1,109	1,109
Goodwill	560	565
Deferred income tax assets	55	57
Other long-term assets	2,320	2,388
Total assets	71,907	77,617
Current liabilities
Accounts payable	4,301	5,053
Contract liabilities	1,361	1,237
Accrued expenses and other current liabilities	20,531	12,805
Current portion of loans payable, net	111,670
Total current liabilities	137,863	19,095
Long-term loans payable, net	0	107,059
Other long-term liabilities	2,525	6,797
Total liabilities	140,388	132,951
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 March 31, 2024 and December 31, 2023
Common stock ($0.001 par value) 21,875,000 shares authorized as of March 31, 2024 and December 31, 2023, 6,216,349 and 6,165,806 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	6	6
Additional paid-in capital	494,615	492,764
Accumulated other comprehensive (loss) income	(71)	91
Accumulated deficit	(563,031)	(548,195)
Total stockholders' deficit	(68,481)	(55,334)
Total liabilities and stockholders' deficit	$ 71,907	$ 77,617

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) $ in Thousands	Mar. 31, 2024 USD ($) $ / shares shares	Dec. 31, 2023 USD ($) $ / shares shares
Expected credit losses | $	$ 229	$ 160
Preferred stock, par value | $ / shares	$ 0.001	$ 0.001
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value | $ / shares	$ 0.001	$ 0.001
Common stock, shares authorized	21,875,000	21,875,000
Common stock, shares issued	6,216,349	6,165,806
Common stock, shares outstanding	6,216,349	6,165,806

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2024	Mar. 31, 2023
Income Statement [Abstract]
Net revenue		$ 19,134	$ 17,731
Cost of revenue		9,477	11,519
Gross profit		9,657	6,212
Operating expenses
Research and development		3,632	3,987
Sales and marketing		7,142	9,592
General and administrative		4,472	5,770
Impairment of right-of-use assets			432
(Gain) loss on disposal of property and equipment		(8)	55
Total operating expenses		15,238	19,836
Loss from operations		(5,581)	(13,624)
Other (expense) income
Interest expense		(9,253)	(4,331)
Interest income		5	28
Foreign currency gain (loss)		4	(154)
Net loss before income taxes		(14,825)	(18,081)
Provision for income taxes		11	9
Net loss		(14,836)	(18,090)
Other comprehensive income (loss):
Foreign currency translation adjustments		(162)	135
Total other comprehensive (loss) income		(162)	135
Total comprehensive loss		$ (14,998)	$ (17,955)
Net loss per share - basic		$ (2.31)	$ (3.56)
Net loss per share - diluted		$ (2.31)	$ (3.56)
Weighted-average number of shares used in calculating net loss per share, basic	[1]	6,430,502	5,076,075
Weighted-average number of shares used in calculating net loss per share, diluted	[1]	6,430,502	5,076,075

[1] On August 18, 2023, the Company effected a 1:8 reverse stock split for each share of common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock split.

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (Parenthetical)	Aug. 18, 2023
Common Stock
Reverse stock split ratio	8

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance at Dec. 31, 2022	$ (28,190)	$ 4	$ 461,965	$ (157)	$ (490,002)
Beginning balance, shares at Dec. 31, 2022		3,564,505
Issuance of common stock and pre-funded warrants and accompanying warrants in private placement, net	20,943	$ 2	20,941
Issuance of common stock and pre-funded warrants and accompanying warrants in private placement, net, Shares		2,187,781
Issuance of common stock upon exercise of options, shares		28
Issuance of common stock upon settlement of restricted stock units, shares		21,967
Issuance of common stock for services	59		59
Issuance of common stock for services, shares		2,711
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)
Ending balance at Mar. 31, 2023	(22,354)	$ 6	485,754	(22)	(508,092)
Ending balance, shares at Mar. 31, 2023		5,776,992
Beginning balance at Dec. 31, 2023	(55,334)	$ 6	492,764	91	(548,195)
Beginning balance, shares at Dec. 31, 2023		6,165,806
Issuance of common stock upon exercise of options	1		1
Issuance of common stock upon exercise of options, shares		1,339
Issuance of common stock upon settlement of restricted stock units, shares		37,818
Issuance of common stock for services	20		20
Issuance of common stock for services, shares		11,386
Issuance of common stock warrants	16		16
Stock-based compensation expense	1,814		1,814
Foreign currency translation adjustments	(162)			(162)
Net loss	(14,836)				(14,836)
Ending balance at Mar. 31, 2024	$ (68,481)	$ 6	$ 494,615	$ (71)	$ (563,031)
Ending balance, shares at Mar. 31, 2024		6,216,349

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Unaudited) (Parenthetical)	Aug. 18, 2023
Common Stock
Reverse stock split ratio	8

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash flows from operating activities
Net loss	$ (14,836)	$ (18,090)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense	1,834	2,820
Depreciation and amortization	1,306	1,248
Provision for credit losses	69	49
Provision for inventory valuation		165
Non-cash lease expense	235	387
Impairment of right-of-use assets		432
(Gain) loss on disposal of property and equipment	(8)	55
Placed units reserve	76	344
Interest paid in-kind	2,527	2,194
Non-cash interest expense	4,931	620
Amortization of discount on debt	184	184
Deferred income taxes	11	9
Changes in operating assets and liabilities:
Accounts receivable	389	663
Inventories	(1,112)	4,384
Prepaid expenses and other assets	(467)	(1,234)
Accounts payable	(561)	114
Contract liabilities	124	(25)
Accrued expenses and other current liabilities	(618)	(3,768)
Operating lease liabilities, current and long-term	(641)	(585)
Net cash used in operating activities	(6,557)	(10,034)
Cash flows from investing activities
Purchases of property and equipment	(1,410)	(1,004)
Net cash used in investing activities	(1,410)	(1,004)
Cash flows from financing activities
Proceeds from issuance of common stock and pre-funded warrants and accompanying warrants in private placement, net of issuance costs		20,943
Proceeds from loans, net of discount	1,920
Payment of deferred financing costs	(250)
Proceeds from exercise of stock options	1
Net cash provided by financing activities	1,671	20,943
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(125)	70
Net (decrease) increase in cash, cash equivalents and restricted cash	(6,421)	9,975
Cash, cash equivalents and restricted cash
Beginning of period	10,834	16,847
End of period	4,413	26,822
Supplemental disclosures of cash flow information
Interest paid during the period	1,613	1,284
Property and equipment purchases in accounts payable and accrued expenses	369	354
Issuance of common stock warrants in conjunction with long term debt	16	28
Issuance of common stock for services	$ 20	$ 59

XML

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (14,836)	$ (18,090)

XML

Insider Trading Arrangements	3 Months Ended
	Mar. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

XML

Description of Business

3 Months Ended

Mar. 31, 2024

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 respiratory distress, whether associated with complex lung diseases such as chronic obstructive pulmonary disease (“COPD”), congestive heart failure, pneumonia, asthma and COVID-19 or other systemic conditions. The Company’s mission is to improve the lives of patients suffering from complex lung disease and other forms of respiratory distress while reducing the cost of their care through integrated device and digital solutions. 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 the 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 remote 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. Although the Company exited the Vapotherm Access call center business, the underlying technology is being incorporated in the Company’s home based device it has been actively developing at its Technology Center in Singapore. While these device and digital solutions function independently, the Company believes leveraging the two together can create a unique healthcare ecosystem, focused on delivering high quality, efficient respiratory care in a variety of settings.

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 suffering from respiratory distress, including 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 HVT 2.0 and Precision Flow systems (together, “High Velocity Therapy 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 initial 510(k) clearance from the U.S. Food and Drug Administration (“FDA”) in 2021, transitioned to full market release in August 2022, and received clearance for expanded respiratory distress indications in December 2022.

The Company sells its High Velocity Therapy systems to hospitals through a direct sales organization in the United States and in select international markets and through distributors in other select international markets. In late 2020, the Company launched its OAM in select international markets, which can be used with most versions of the Company’s Precision Flow system, and OAM capability has been built into the HVT 2.0 for future 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 OAM is sold through a direct sales organization in select international markets and through distributors in select international markets. The Company is no longer seeking FDA approval to market the Precision Flow version of the OAM in the United States, but will instead focus future efforts on the HVT 2.0 version of the OAM for the United States market. In addition, the Company employs field-based clinical managers 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.

Going Concern

The Company has evaluated whether or not its cash, cash equivalents and restricted cash on hand and working capital would be sufficient to sustain forecasted operating activities through May 9, 2025 (“evaluation period”), as required by Accounting Standards Codification (“ASC”) 205-40, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. As of March 31, 2024, the Company had cash, cash equivalents and restricted cash of $4.4 million, negative working capital of $96.4 million and outstanding debt under the Company’s Loan and Security Agreement (the “SLR Loan Agreement”) with the lenders party thereto (each a “lender” and collectively, “SLR” or the “Lenders”) of $113.8 million. The Company is presently not in compliance with its minimum liquidity covenant of $5.0 million (the “Liquidity Covenant”) and the term loans under the SLR Loan Agreement have become puttable at the sole discretion of SLR. As of the date of these condensed consolidated financing statements are available

for issuance, SLR has not declared the Company in default on the Liquidity Covenant. The Company had an accumulated deficit of $563.0 million as of March 31, 2024 and incurred a net loss of $14.8 million and generated a cash flow deficit from operations of $6.6 million, both for the three months ended March 31, 2024.

Based on its recurring losses, current financial forecasts and its continuing noncompliance with the Liquidity Covenant, the Company believes its existing cash resources and borrowing capacity under its SLR Loan Agreement, anticipated cash receipts from sales of its products and monetization of its existing inventory balances will not be sufficient to meet its anticipated cash requirements during the next 12 months, which raises substantial doubt about the Company’s ability to continue as a going concern. To ensure adequate liquidity, the Company is in discussions with SLR about restructuring its debt and evaluating various external financing options, although no assurance can be provided that the Company will be successful in restructuring its debt or securing additional sources of funds to support its operations, or if such funds are available to the Company, that such additional financing will be sufficient to meet the Company’s needs or on terms acceptable to the Company. This is particularly true if economic and market conditions deteriorate or if the Company’s business deteriorates. Any such transaction or restructuring could be dilutive to existing stockholders. In addition, on March 26, 2024, the Company entered into an amendment to its SLR Loan Agreement while the Company evaluates its debt restructuring and financing options. This amendment provided for a $4.0 million term B facility and extends the Company’s option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period from March 1, 2024 through April 30, 2024 with an additional extension to include interest accruing through May 31, 2024 at the sole discretion of SLR, (see Note 7). The Company believes its relationship with SLR is good. Since these restructuring and financing options are not considered probable under current accounting standards, they are not considered in the evaluation of available resources. There is inherent uncertainty associated with fundraising activity and it is not in the Company’s complete control. If the Company is unable to restructure its debt and/or obtain additional financing, it would be required to curtail operations significantly, including reducing its operating expenses which, in turn would, negatively impact the Company’s sales, or even cease operations. Any debt restructuring or additional financing that the Company raises may contain terms that are not favorable to the Company or its stockholders and could result in additional dilution. As a result, substantial doubt exists about the Company’s ability to continue as a going concern within the evaluation period.

The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties described above. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The information included in these condensed consolidated financial statements on this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” in the Company’s 2023 Form 10-K and are updated, as necessary, in this report. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP.

Principles of Consolidation

These condensed consolidated financial statements include the accounts of the Company, which includes its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Segment Information

Operating segments are defined as components of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company globally manages the business within one reporting segment, Vapotherm, Inc., and two reporting units, Vapotherm and Vapotherm UK Ltd. (“Vapotherm UK”). Segment information is consistent with how the chief operating decision maker reviews the business, makes investing and resource allocation decisions and assesses operating performance.

As of March 31, 2024, the majority of the Company’s long-term assets are located in the United States. Long-term assets located outside the United States totaled $14.6 million, including $8.9 million located in Mexico, at March 31, 2024. Long-term assets located outside the United States totaled $14.9 million, including $9.9 million located in Mexico, at December 31, 2023.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. The Company evaluates its estimates on an ongoing basis. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant estimates relied upon in preparing these condensed consolidated financial statements include calculation of stock-based compensation, valuation of warrants, realizability of inventories, allowance for credit losses, accrued expenses, the valuation allowances against deferred income tax assets, and assessments of impairment with respect to long-lived and intangible assets, including goodwill. Actual results may differ from these estimates.

Reclassification

Certain amounts in 2023 have been reclassified to conform to the presentation in 2024. None of the reclassifications had any impact on the Company’s results of operations.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2024, and the condensed consolidated statements of comprehensive loss, stockholders’ deficit and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments,

which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2024 and the results of its operations and cash flows for the three months ended March 31, 2024 and 2023. The financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are also unaudited. The results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Financial Instruments and Concentrations of Credit Risk

As of March 31, 2024, the Company’s financial instruments included cash and cash equivalents, restricted cash, accounts receivable, accounts payable and debt, the carrying amounts of which approximated fair value due to their short-term nature or market interest rates. All of the Company’s cash and cash equivalents are maintained at creditworthy financial institutions. At March 31, 2024, deposits exceed the amount of any insurance provided and are exposed to credit loss.

The Company extends credit to customers in the normal course of business but typically does not require collateral or any other security to support amounts due. Management performs ongoing credit evaluations of its customers. The Company recognizes an allowance for credit losses equal to its current estimate of all contractual cash flows that the Company does not expect to collect. The Company’s estimate considers relevant information about past events, current conditions, and reasonable and supportable forecasts. Provisions for the allowance for credit losses are recorded in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive loss.

Supplier Risk

The Company obtains some of the components and subassemblies included in its High Velocity Therapy systems and its OAM from single source suppliers. The partial or complete loss of one or more of these suppliers could cause significant production delays, an inability to meet customer demand and a substantial loss in revenue.

Foreign Currency and Foreign Operations

The functional currency of the Company is the currency of the primary economic environment in which the entity operates, which is the U.S. dollar. For the Company’s non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign currency exchange rates for the period. Adjustments resulting from the translation of the financial statements of its foreign operations into U.S. dollars are excluded from the determination of net loss and are recorded in accumulated other comprehensive income (loss), a separate component of stockholders’ deficit.

Realized foreign currency gains or losses arising from transactions denominated in foreign currencies are recorded in other (expense) income in the condensed consolidated statements of comprehensive loss. Unrealized foreign currency gains or losses arising from transactions denominated in foreign currencies are recorded in accumulated other comprehensive income (loss).

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid temporary investments purchased with original maturities of 90 days or less to be cash equivalents. The Company holds restricted cash and restricted cash equivalents related to certificates of deposits and collateral in relation to lease agreements. As of March 31, 2024, $0.9 million of the Company’s $4.4 million of cash, cash equivalents and restricted cash balance was located outside the United States. As of December 31, 2023, $1.9 million of the Company’s $10.8 million of cash, cash equivalents and restricted cash balance was located outside of the United States. The Company’s cash, cash equivalents

and restricted cash balances are primarily held by Canadian Imperial Bank of Commerce Innovation Banking (“CIBC”) and Bank of America, N.A.

The following table presents the components of total cash, cash equivalents, and restricted cash as set forth in the Company’s condensed consolidated statements of cash flows:

	March 31, 2024		December 31, 2023
Cash and cash equivalents	$	3,304	$	9,725
Restricted cash		1,109		1,109
Total cash, cash equivalents, and restricted cash	$	4,413	$	10,834

Leases

The Company’s operating leases primarily consist of real estate leases for office, manufacturing, research and development, and warehouse space, as well as certain vehicle and equipment leases. Accounting Standards Codification (“ASC”), Leases (“ASC 842”) requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset, subject to certain permitted accounting policy elections. Under ASC 842, the Company determines whether a contract is or contains a lease at the inception of the contract. This determination is based on whether the contract provides the Company the right to control the use of a physically distinct asset and substantially all of the capacity of an asset. Leases with an initial noncancelable term of twelve months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise are classified as short-term leases. The Company has elected as an accounting policy to exclude from the consolidated balance sheets the right-of-use assets and lease liabilities related to short-term leases. The Company recognizes rent expense for its operating leases on a straight-line basis over the term of the lease.

Certain of the Company’s leases include options to extend or terminate the lease at its sole discretion. The Company does not consider in the measurement of right-of-use assets and lease liabilities an option to extend or terminate a lease if the Company is not reasonably certain to exercise the option. Certain of the Company’s leases include covenants that oblige the Company, at its sole expense, to repair and maintain the leased asset periodically during the lease term. The Company is not a party to any leases that contain residual value guarantees.

Many of the Company’s leases include fixed and variable payments. Among other charges, variable payments related to real estate leases include real estate taxes, insurance, operating expenses, and common area maintenance, which are usually billed at actual amounts incurred proportionate to the Company’s rented square feet of the building. Variable payments related to vehicle and equipment leases relate to usage of the underlying asset, sales and use tax, and value-added tax. Variable payments that do not depend on an index or rate are expensed as incurred and are not included in the measurement of the lease liability.

In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. buildings, vehicles, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). The fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated to the lease components and non-lease components based on their relative fair values. The Company elected the accounting policy to not separate lease and non-lease components for its real estate, vehicle, and equipment leases. Therefore, each lease component and the related non-lease components and non-components are accounted for together as a single component.

The Company measures its lease liability for each leased asset as the present value of lease payments, as defined in ASC 842, discounted using a discount rate specific to the terms of the underlying lease. The Company’s right-of-use assets are equal to the related lease liabilities, adjusted for lease incentives received including tenant improvement allowances, initial direct costs incurred related to the lease, and payments made to the lessor prior to the lease commencement date. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company estimates its incremental borrowing rate for each leased asset based on the interest rate the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

When impairment indicators are present, the Company evaluates the recoverability of its right-of-use assets. If the assessment indicates an impairment, the affected assets are written down to fair value (see Note 9).

Product Warranty

The Company provides its customers with a standard one-year warranty on its capital equipment sales. Warranty costs are accrued based on actual historical trends and estimated at the time of sale. The warranty liability is included within accrued expenses and other current liabilities in the condensed consolidated balance sheets. A roll-forward of the Company’s warranty liability from December 31, 2023 to March 31, 2024 is as follows:

Balance at December 31, 2023	$	303
Provisions for warranty obligations		(5	)
Settlements		(57	)
Balance at March 31, 2024	$	241

Revenue Recognition

The Company’s revenue is primarily derived from the sale of products, leases and services. Product revenue consists of capital equipment and single-use disposables that are shipped and billed to customers both domestically and internationally. The Company’s main capital equipment products are the High Velocity Therapy systems. The Company’s main disposable products are single-use disposables and nasal interfaces, or cannulas, and adaptors. Lease revenue consists of two components which include capital equipment that the Company leases to its customers and, in certain situations, an allocation from disposable revenue to other lease revenue upon the sale of disposable products in bundled arrangements involving the placement of the High Velocity Therapy capital units for use by the customer at no upfront charge in connection with the customer’s ongoing purchase of disposable products. Service revenue consists of fees associated with routine service of capital units and the sale of extended service contracts and preventative maintenance plans, which are purchased by a small portion of the Company’s customer base. In addition, the Company sells small quantities of component parts in the United States, United Kingdom, and to third-party international service centers who provide service on the High Velocity Therapy capital units outside of the United States and United Kingdom. Freight revenue is based upon actual freight costs plus a percentage markup of such costs associated with the shipment of products domestically, and to a lesser extent, internationally, and is included in service revenue. Rebates and fees consist of contractually obligated administrative fees and percentage-of-sales rebates paid to Group Purchasing Organizations (“GPOs”), Integrated Delivery Networks (“IDNs”) and distributor partners and are accounted for as a reduction to the corresponding revenue category.

Under the Financial Accounting Standard Board’s (“FASB”) ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and assesses whether each promised good or service is distinct and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value-added, and other taxes collected on behalf of third parties are excluded from revenue. The Company’s standard payment terms are generally 30 days from the date of sale.

Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative stand-alone selling prices of the promised products or services underlying each performance obligation. The Company determines stand-alone selling prices based on the price at which the performance obligation is sold separately. If the stand-alone selling price is not observable through past transactions, the Company estimates the stand-alone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Revenue is generally recognized when the customer obtains control of the Company’s product, which generally occurs at a point in time upon shipment based on the contractual shipping terms of a contract.

Product and service revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, the Company

estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value amount method to which the Company expects to be entitled. As such, revenue on sales is recorded net of prompt pay discounts and payments made to GPOs, IDNs and distributors. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Determination of whether to include estimated amounts in the transaction price is based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. The Company believes that the estimates it has established are reasonable based upon current facts and circumstances. Applying different judgments to the same facts and circumstances could result in different estimates.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying a practical expedient under ASC 606, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component during the three months ended March 31, 2024 or 2023.

The Company’s contracts with its customers generally have a duration of less than one year. Therefore, the Company has elected to apply a practical expedient and recognizes the incremental costs of obtaining contracts as an expense. These costs are included in sales and marketing expenses in the accompanying condensed consolidated statements of comprehensive loss.

Lease Revenue

The Company also enters into agreements to lease its capital equipment. For such sales, the Company accounts for revenue under ASC 842, and assesses and classifies these transactions as sales-type or operating leases based on whether the lease transfers ownership of the equipment to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term. Equipment included in arrangements including transfer of title are accounted for as sales-type leases and the Company recognizes the present value of the lease payments due over the lease term as revenue at the inception of the lease. The Company records the present value of future lease payments in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets; these amounts each totaled $0.1 million at March 31, 2024 and December 31, 2023. Equipment included in arrangements that do not include the transfer of title, nor any of the sales-type or direct financing lease criteria, are accounted for as operating leases and revenue is recognized on a straight-line basis over the term of the lease.

The Company also enters into agreements involving the placement of its High Velocity Therapy capital units for use by the customer at no upfront charge in connection with the customer’s ongoing purchase of disposable products. In these bundled arrangements, revenue recognized for the sale of the disposables is allocated between disposable revenue and other lease revenue based on the estimated relative stand-alone selling prices of the individual performance obligations.

Shipping and Handling Costs

Amounts billed to customers for shipping and handling are included in service revenue. Shipping and handling costs are included in cost of revenue. Shipping and handling activities are accounted for as activities to fulfill a contract and are accrued when the customer obtains control of the Company’s product. The total costs of shipping and handling for the three months ended March 31, 2024 and 2023 were $0.2 million and $0.3 million, respectively.

Sales and Value-Added Taxes

When required by local jurisdictions, the Company bills its customers for sales tax and value-added tax calculated on each sales invoice and records a liability for the sales and value-added tax payable, which is included in accrued expenses and other current liabilities in the condensed consolidated balance sheets. Sales tax and value-added tax billed to a customer are not included in the Company’s revenue.

Stock-Based Compensation

The Company maintains an equity incentive plan to provide long-term incentives for employees, consultants, and members of the board of directors. The plan allows for the issuance of non-statutory and incentive stock options, restricted stock, unrestricted

stock, stock units, including restricted stock units and performance stock units, and stock appreciation rights to employees, consultants and non-employee directors. The Company recognizes stock-based compensation expense for awards of equity instruments to employees and non-employees based on the grant date fair value of those awards in accordance with ASC Topic 718, Stock Compensation (“ASC 718”). ASC 718 requires all equity-based compensation awards, including grants of restricted stock, restricted stock units, performance stock units and stock options, to be recognized as expense in the condensed consolidated statements of comprehensive loss based on their grant date fair values.

The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. The fair value of restricted stock and restricted stock units is measured at the market value of the related shares of the Company’s common stock on the grant date. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period and is generally three to four years. For performance-based awards, the related compensation cost is amortized over the performance period on an accelerated attribution basis. Compensation cost associated with performance awards is based on fair value on the date of grant and the number of units expected to be earned after assessing the probability that certain performance criteria will be met and the associated targeted payout level that is forecasted will be achieved. Cumulative adjustments are recorded each quarter to reflect estimated outcomes of the performance-related conditions until the results are determined and settled. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including the expected life (weighted average period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock and an assumed risk-free interest rate. Expected volatility is based on the historical volatility of the Company’s common stock. The expected life is estimated using the historical life of options issued under the Company’s equity plan. The risk-free interest rate is based on U.S. Treasury rates with a remaining term that approximates the expected life assumed at the date of grant. No dividend yield is assumed as the Company does not pay, and does not expect to pay, dividends on its common stock. The Company estimates forfeitures based on historical experience with pre-vested forfeitures. To the extent actual forfeitures differ from the estimate, the difference is recorded to compensation expense in the period of the forfeiture.

The Company recognizes stock-based compensation expense for shares of its common stock issued pursuant to the Vapotherm, Inc. 2018 Employee Stock Purchase Plan (“ESPP”) on a straight-line basis over the related offering period. The Company estimates the fair value of shares to be issued under the ESPP based on a combination of options valued using the Black-Scholes option pricing model. The expected life is determined based on the contractual term. Dividend yield, risk-free interest rate, forfeiture rates, and expected volatility are estimated in a manner similar to option grants described above.

Income Tax

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the condensed consolidated financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial reporting and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the condensed consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the condensed consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

The Company’s major tax jurisdictions are the state of New Hampshire, the United States, United Kingdom, Germany, Mexico, Singapore, and Brazil. The provision for income taxes for each of the three months ended March 31, 2024 and 2023 totaled less than $0.1 million, and related to income earned by the Company’s foreign subsidiaries after accounting for transfer pricing adjustments.

Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and tax credit carryforwards that can be utilized to offset future taxable income and reduce taxes, respectively. The Company has not currently completed an evaluation of ownership changes through December 31, 2023 to assess whether utilization of the Company’s net operating loss and tax credit carryforwards would be subject to an annual limitation under Sections 382 and 383 of the Code. To the extent an ownership change is determined to have occurred under Sections 382 and 383 of the Code, the net operating loss and tax credit carryforwards may be subject to limitation.

Recently Issued Accounting Pronouncements

Improvements to Reportable Segment Disclosures (Topic 280):

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses and segment-related data. For public companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.

Improvements to Income Tax Disclosure (Topic 740):

In December 2023, the FASB issued ASU No. 2023-09, Income Tax (Topic 740) - Improvements to Income Tax Disclosures which requires companies to break out their income tax expense, income tax rate reconciliation and income tax payments made in more detail. For public companies, the requirements will become effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

In accordance with ASC 820, Fair Value Measurements and Disclosures, the Company generally defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements), and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 – inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

As of March 31, 2024, the Company had two items, cash equivalents and an embedded derivative, measured at fair value on a recurring basis. The Company’s cash equivalents primarily consist of money market deposits which totaled approximately less than $0.1 million at March 31, 2024 and are valued based on Level 1 of the fair value hierarchy. The Company’s embedded derivative relates to the Company’s financing arrangement (see Note 7). Its fair value is deemed to be immaterial at March 31, 2024 and is valued based on Level 3 of the fair value hierarchy. There were no transfers in or out of Level 1, 2 or 3 during the three months ended March 31, 2024.

During the first quarter of 2024 and 2023, the Company issued SLR warrants to purchase 79,146 shares and 13,547 shares of common stock (the “SLR PIK Warrants”), respectively. The issuance of the warrants were made pursuant to amendments to the Company’s financing arrangement (see Note 7). These equity-classified PIK Warrants were valued using the Black-Scholes pricing model, which falls within Level 3 of the fair value hierarchy.

The fair value of the warrants are estimated on the date of grant using the Black-Scholes pricing model with the following range of assumptions:

	2024	2023
Expected dividend yield	0.0%	0.0%
Risk free interest rate	4.1%-4.5%	4.0%-4.6%
Expected stock price volatility	20.8%-21.0%	20.8%-20.9%
Expected term (years)	2.5	2.5

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Accounts Receivable

3 Months Ended

Mar. 31, 2024

Receivables [Abstract]

Accounts Receivable

4. Accounts Receivable

Accounts receivable consists of the following:

	March 31, 2024			December 31, 2023
United States	$	6,854		$	6,837
International		3,578			3,995
Total accounts receivable		10,432			10,832
Less: Allowance for expected credit losses		(229	)		(160	)
Accounts receivable, net of expected credit losses	$	10,203		$	10,672

A roll-forward of the Company’s allowance for credit losses from December 31, 2023 to March 31, 2024 is as follows:

Balance at December 31, 2023	$	160
Change in provision for credit losses		69
Write-offs of uncollectible balances		-
Balance at March 31, 2024	$	229

No individual customer accounted for 10% or more of net revenue for the three months ended March 31, 2024 or 2023. No individual customer accounted for 10% or more of total accounts receivable at March 31, 2024. One customer accounted for 10% of total accounts receivable as of December 31, 2023.

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Inventories

3 Months Ended

Mar. 31, 2024

Inventory Disclosure [Abstract]

Inventories

5. Inventories

Inventory balances, net of reserves, consist of the following:

	March 31, 2024		December 31, 2023
Raw materials	$	12,050	$	11,982
Finished goods		11,509		9,954
Component parts		504		1,032
Total inventories	$	24,063	$	22,968

The Company recorded a provision for excess and obsolete inventory of $0.2 million for the three months ended March 31, 2023. There was no provision for excess and obsolete inventory recorded during the three months ended March 31, 2024.

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Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities

3 Months Ended

Mar. 31, 2024

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities

6. Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities

Accrued expenses and other current liabilities consist of the following:

	March 31, 2024		December 31, 2023
Accrued term loan fees	$	8,760	$	-
Operating lease liabilities, current portion		2,377		2,414
Accrued inventories		1,193		596
Accrued income, sales and other taxes		1,100		997
Accrued bonuses		1,056		1,927
Accrued payroll and employee-related costs		1,023		781
Accrued interest		867		847
Accrued commissions		640		548
Accrued professional fees		550		617
Accrued supplier costs		450		450
Accrued vacation liability		408		494
Product warranty reserve		241		303
Accrued freight		222		243
Accrued rent and restoration costs		-		489
Other		1,644		2,099
Total accrued expenses and other current liabilities	$	20,531	$	12,805

Other long-term liabilities consist of the following:

	March 31, 2024		December 31, 2023
Operating lease liabilities	$	2,521	$	2,919
Accrued term loan fees		-		3,874
Other		4		4
Total other long-term liabilities	$	2,525	$	6,797

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Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt

7. Debt

Credit Facilities

On February 18, 2022 (the “Effective Date”), the Company entered into the SLR Loan Agreement with SLR which provided for a term A loan facility of $100.0 million (the “Term A Loan Facility”). The Term A Loan Facility was funded to the Company on the Effective Date. In connection with this funding, the Company issued SLR warrants to purchase 13,421 shares of the Company’s common stock at an exercise price of $111.76 per share, which were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and expire in February 2032. The proceeds of the Term A Loan Facility were used to repay all indebtedness under the Company’s prior loan agreement with CIBC.

On November 22, 2022 (the “Third Amendment Effective Date”), the Company entered into an Amendment No. 3 to the SLR Loan Agreement (the “Third Amendment,” together with SLR Loan Agreement, as amended prior to the Third Amendment Effective Date, the “Third Amended SLR Loan Agreement”) with SLR. Pursuant to the Third Amendment:

•the Company’s minimum net product revenue covenant was modified for 2023;

•the minimum liquidity covenant was reduced to $5 million from $20 million; and

•an option was added, at the Company’s sole discretion, to pay up to 8% of the interest under the Third Amended SLR Loan Agreement in-kind (rather than solely in cash as provided for prior to the Third Amendment Effective Date)

during 2023 (the “PIK Interest”), subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to the lenders equal to 5% of the PIK Interest.

On February 10, 2023 (the “Fourth Amendment Effective Date”), the Company entered into an Amendment No. 4 to the SLR Loan Agreement (the “Fourth Amendment,” together with the Third Amended SLR Loan Agreement, the “Fourth Amended SLR Loan Agreement”) with SLR. The Fourth Amendment includes the option for the Company to pay up to 9% of the interest in-kind (rather than up to 8% as provided for prior to the Fourth Amendment Effective Date) during 2023.

Additionally, if the Company elects PIK Interest of 9%, the amount of warrants to be issued to SLR increases to be 5% times the amount of PIK Interest for the first 4% of the PIK Interest selected and 12.20% times on the next 5% of the amount of PIK Interest selected to provide for a weighted average of 9%, and the Company’s monthly interest expense increases by 1% for the month in which such PIK Interest is selected. The Fourth Amendment also provided for a reset of the exercise price of the warrants to be issued in connection with the Company’s election of PIK Interest, including existing PIK Warrants, equal to the lower of the Company’s closing stock price for (a) the 10-day trailing average closing price ending on the day before the interest payment date, (b) the day before the interest payment date, or (c) $9.36 per share.

On April 17, 2023, the Company entered into an Amendment No. 5 to the SLR Loan Agreement (the “Fifth Amendment,” together with the Fourth Amended SLR Loan Agreement, the “Fifth Amended SLR Loan Agreement”) with SLR to exclude the Company’s Singapore subsidiary operating account from the requirement of a control agreement in favor of SLR, provided the account balance is the lower of (i) $250,000 or (ii) the amount required to fund expenditures therefrom within the next ten business days. The Fifth Amendment also contains other customary provisions, such as expense reimbursement.

On February 21, 2024, the Company entered into an Amendment No. 6 to the SLR Loan Agreement (the “Sixth Amendment,” together with the Fifth Amended SLR Loan Agreement, the “Sixth Amended SLR Loan Agreement”) with SLR to extend the Company’s option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period January 1, 2024 through February 29, 2024, subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to equal 9% of the PIK Interest.

On March 26, 2024 (the “Seventh Amendment Effective Date”), the Company entered into an Amendment No. 7 to the SLR Loan Agreement (the “Seventh Amendment,” together with the Sixth Amended SLR Loan Agreement, the “Seventh Amended SLR Loan Agreement”) with SLR. The Seventh Amendment established a term B loan facility of $4.0 million (the “Term B Loan Facility”). Borrowings under the Term B Loan Facility are available from the Seventh Amendment Effective Date until July 26, 2024 (the “Term B Maturity Date”) and shall be conditioned on approval by the lenders’ investment committee in its sole discretion. On the Seventh Amendment Effective Date, $2.0 million was funded to the Company. On April 26, 2024, an additional $1.0 million was funded to the Company under the Term B Loan Facility. The Term B Loan Facility provides for interest-only payments and aggregate principal outstanding shall be due and payable on the Term B Maturity Date. The Company will be required to make a payment of 0.2% of the aggregate principal amount of the Term B Loan Facility funded (the “Term B Facility Exit Fee”), which is payable on the earliest to occur of (i) the Term B Maturity Date, (ii) the acceleration of the Seventh Amended SLR Loan Agreement prior to the Term B Maturity Date, and (iii) the prepayment date of the Seventh Amended SLR Loan Agreement prior to the Term B Maturity Date. The Term B Facility Exit Fee of less than $0.1 million is considered fully earned by SLR as of the Seventh Amendment Effective Date and has been fully accrued as of March 31, 2024 due to the Company’s continuing noncompliance with the Liquidity Covenant. In addition, the Seventh Amendment extended the Company’s option to pay up to 9% of interest in-kind (rather than solely in cash) for interest accruing for the period from March 1, 2024 through April 30, 2024 with an additional extension to include interest accruing through May 31, 2024 at the sole discretion of SLR. The PIK Interest extension is subject to payment of a fee equal to 10% of the PIK Interest, and the issuance of additional warrants to equal to 9% of the PIK Interest.

Pursuant to the Seventh Amended SLR Loan Agreement, advances under the Term A Loan Facility bear interest at a floating rate per annum equal to (a) the greater of (i) 1.00% or (ii) the 1-month Chicago Mercantile Exchange (“CME”) Term Secured Overnight Financing Rate (“SOFR”) plus 0.10%, plus (b) (i) 8.30% under a PIK Interest option of 4% or 0%, or (ii) 9.30% under a PIK Interest option of 9%. Advances under the Term B Loan Facility bear interest at a floating rate per annum equal to the sum of (a) 0.10%, plus (b) 8.30% plus (c) the 1-month CME Term SOFR plus 0.10%. At March 31, 2024, the interest rate under the Term A Loan Facility and Term B Loan Facility was 14.72% and 13.82%, respectively. The Company paid interest in-kind on the Term A Loan Facility totaling $2.5 million and $2.1 million during the three months ended March 31, 2024 and 2023, respectively. The outstanding balance under the Term A Loan Facility and Term B Loan Facility was $111.8 million and $2.0 million, respectively, at March 31, 2024. The Term A Loan Facility provides for interest-only payments for the first 48 months following the Effective Date.

Thereafter, principal payments on the Term A Loan Facility are due monthly in 12 equal installments; provided that the Company has the option to extend the interest-only period for an additional 12 months upon achievement of a certain minimum revenue level as more fully described in the Seventh Amended SLR Loan Agreement. The Term A Facility will mature on February 1, 2027 (the “Term A Maturity Date”). The Seventh Amended SLR Loan Agreement may be prepaid in full, subject to a prepayment charge of 1.0%, if such prepayment occurs after February 18, 2024 but on or prior to the Term A Maturity Date (the “Prepayment Penalty”). In addition to the payment of principal and accrued interest, the Company will be required to make a payment of 7.45% of the aggregate principal amount of the Term A Loan Facility funded (the “Term A Facility Exit Fee”), which is payable on the earliest to occur of (i) the Term A Maturity Date, (ii) the acceleration of the Seventh Amended SLR Loan Agreement prior to the Term A Maturity Date, and (iii) the prepayment date of the Seventh Amended SLR Loan Agreement prior to the Term A Maturity Date. The Term A Facility Exit Fee of $7.5 million is considered fully earned by SLR as of the Effective Date and has been fully accrued as of March 31, 2024 due to the Company’s continuing noncompliance with the Liquidity Covenant. In connection with the Seventh Amended SLR Loan Agreement, the Company has incurred direct financing costs related to fees and non-cash consideration paid to SLR and fees paid to third parties of $2.2 million and $1.6 million, respectively, as of March 31, 2024. The Seventh Amended SLR Loan Agreement is secured by a lien on substantially all of the assets, including intellectual property, of the Company.

The Seventh Amended SLR Loan Agreement contains customary covenants and representations, including, without limitation, a minimum revenue covenant equal to a percentage of each month’s forecasted net product revenue as defined in the Seventh Amended SLR Loan Agreement (tested on a trailing six month basis at the end of each fiscal month, commencing with the six month period ending on August 31, 2022), the Liquidity Covenant, and other financial covenants, reporting obligations, and limitations on dispositions, changes in business or ownership, mergers or acquisitions, indebtedness, encumbrances, distributions and investments, transactions with affiliates and capital expenditures. As of March 31, 2024, the Company was not in compliance with the Liquidity Covenant as its unrestricted cash balance was less than $5.0 million. As the Seventh Amended SLR Loan Agreement is considered callable at the sole discretion of SLR, the outstanding principal is presented as a current liability on the condensed consolidated balance sheet at March 31, 2024. The Term A Facility Exit Fee and Term B Facility Exit Fee have been fully accrued as of March 31, 2024 as a component of accrued expenses and other current liabilities. The Company was in compliance with all other financial covenants under the Seventh Amended SLR Loan Agreement at March 31, 2024.

The events of default under the Seventh Amended SLR Loan Agreement include, without limitation, and subject to customary grace periods, (1) the Company’s failure to make any payments of principal or interest under the Seventh Amended SLR Loan Agreement or any other loan documents, (2) the Company’s breach or default in the performance of any covenant under the Seventh Amended SLR Loan Agreement, (3) the occurrence of a material adverse effect or an event that is reasonably likely to result in a material adverse effect, (4) the existence of an attachment or levy on a material portion of the Company’s funds or of the Company’s subsidiaries, (5) the Company’s insolvency or bankruptcy, or (6) the occurrence of certain material defaults with respect to any other of the Company’s indebtedness in excess of $500,000. If an event of default occurs, SLR is entitled to take enforcement action, including an incremental 5% interest rate increase or acceleration of amounts due under the Seventh Amended SLR Loan Agreement (the “Mandatory Prepayment Option”). The Company determined the Mandatory Prepayment Option to be an embedded derivative that is required to be bifurcated from the Seventh Amended SLR Loan Agreement. The Company determined the probability of SLR exercising the Mandatory Prepayment Option due to the Company’s continuing noncompliance with the Liquidity Covenant to be remote and deemed its fair value to be immaterial as of March 31, 2024. The Company re-evaluates the fair value of the Mandatory Prepayment Option at the end of each reporting period.

The Seventh Amended SLR Loan Agreement also contains other customary provisions, such as expense reimbursement and confidentiality. SLR has indemnification rights and the right to assign the Seventh Amended SLR Loan Agreement, subject to customary restrictions.

The annual principal maturities of the Company’s Seventh Amended SLR Loan Agreement as of March 31, 2024 are as follows:

2024 (remaining 9 months)	$	113,836
Less: Unamortized deferred financing costs		(2,166	)
Loans payable, net	$	111,670

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

Lease Commitments

The Company’s operating lease commitments as of December 31, 2023 are described in Note 10 of the notes to the financial statements included in the 2023 Form 10-K.

The following table presents operating lease cost and information related to operating right-of-use and operating lease liabilities for the periods indicated:

	Three Months Ended March 31,
	2024			2023
Operating lease cost	$	348		$	568
Variable lease cost		115			103
Total	$	463		$	671
Operating cash flow impacts:
Cash paid for amounts included in measurement of lease   liabilities	$	753		$	766
Weighted average remaining lease term - operating leases   (in years)		3.4			3.7
Weighted average discount rate - operating leases		10.4	%		9.2	%

As of March 31, 2024, future maturities of lease liabilities under the Company’s noncancelable operating leases are as follows:

	Total Due
2024 (remaining 9 months)	$	2,259
2025		1,177
2026		811
2027		525
2028		481
Thereafter		655
Total payments		5,908
Less interest		(1,010	)
Total present value of lease payments	$	4,898

Legal Matters

From time to time, the Company may become involved in various legal proceedings, including those that may arise in the ordinary course of business. The Company believes there is no litigation pending that could have, individually, or in the aggregate, a material adverse effect on the results of its operations or financial condition.

Guarantees

During the second quarter of 2022, in connection with the Company’s plan to move substantially all of its manufacturing operations from New Hampshire to Mexico, the Company entered into an agreement with TACNA Services, Inc. (“TACNA”) under which TACNA manages the Company’s manufacturing operations in Mexico. In furtherance thereof, Baja Fur, S.A. de C.V. (the “Lessee”), a subsidiary of TACNA, entered into a lease agreement (the “Lease”) with Fraccionadora Residencial Hacienda Agua Caliente, S. de R.L. de C.V. (the “Lessor”), whereby the Lessee agreed to lease property in Tijuana, México to be used as the Company’s manufacturing facility in Mexico. Under Mexican law, the Lease became a legally binding agreement on July 8, 2022. As an inducement to the Lessee and Lessor to enter into the Lease, the Company entered into an absolute unconditional corporate guaranty agreement (the “Guaranty Agreement”) pursuant to which the Company agreed to guaranty the prompt and complete payment and performance when due, whether by acceleration or otherwise, of all obligations, liabilities and covenants of the Lessee to

the Lessor pursuant to the Lease, including all amounts due under the Lease. The Guaranty Agreement will terminate once all obligations of the Lessee arising under the Lease have been satisfied in full and the Lease has been terminated or fully performed. The total obligation outstanding under the Guaranty Agreement was $1.3 million as of March 31, 2024 and was recorded as an operating lease liability in these condensed consolidated financial statements.

Other Commitments

As of March 31, 2024, the Company has non-cancellable purchase commitments for inventories, capital equipment and services as follows:

	Total Due
2024 (remaining 9 months)	$	7,656
2025		1,593
2026		38
	$	9,287

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Restructuring

3 Months Ended

Mar. 31, 2024

Restructuring and Related Activities [Abstract]

Restructuring

9. Restructuring

On April 27, 2022, the Company committed to a plan (the “April 2022 Restructuring”) to relocate substantially all of its manufacturing operations from Exeter, New Hampshire to a company operated manufacturing facility in Tijuana, Mexico and announced a reduction in force at the Exeter, New Hampshire facility that eliminated positions related to production, quality and operations services. As part of the April 2022 Restructuring, the Company also incurred severance related expenses due to senior level personnel retirements and transitions. The termination benefits are classified in the Company’s condensed consolidated statements of comprehensive loss in the manner in which the employees’ salaries and related costs were classified. The Company does not expect to incur additional costs associated with the April 2022 Restructuring.

In late August 2022, in conjunction with the Company’s path to profitability and annual operating planning efforts, the Company committed to a plan (the “August 2022 Restructuring”) to exit the Vapotherm Access call center business and its pulmonology practice, RespirCare, and to restructure its commercial organization in the United States. As a result of the August 2022 Restructuring, the Company eliminated positions related to patient care, marketing and administrative services at Vapotherm Access and RespirCare and executed a reduction in force of the Company’s United States field teams. As part of the August 2022 Restructuring, the Company also incurred severance related expenses due to personnel transitions. The termination benefits are classified in the Company’s condensed consolidated statements of comprehensive loss in the manner in which the employees’ salaries and related costs were classified. The Company does not expect to incur additional costs associated with the August 2022 Restructuring.

There were no restructuring expenses recorded during the three months ended March 31, 2024. All amounts related to the April 2022 and the August 2022 Restructuring were fully paid in 2023.

The following table summarizes the classification of restructuring expense, including related impairment of right-of-use assets, in the condensed consolidated statements of comprehensive loss during the three months ended March 31, 2023:

Cost of revenue	$	56
Impairment of long-lived and intangible assets		432
Total restructuring expense	$	488

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Warrants

3 Months Ended

Mar. 31, 2024

Warrants and Rights Note Disclosure [Abstract]

Warrants

10. Warrants

The table below sets forth the Company’s warrant activity for the three months ended March 31, 2024:

	Common Stock Warrants
	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2023		3,193,710	$	8.36
Warrants issued		79,146		0.96
Outstanding at March 31, 2024		3,272,856	$	8.18

The Company’s outstanding warrants at March 31, 2024 have exercise prices ranging from $0.008 per share to $112.00 per share and expire at periods ranging from June 10, 2024 through January 2, 2034.

In connection with its PIK Interest option, during the three months ended March 31, 2024, the Company has issued SLR the PIK Warrants to purchase an aggregate of 79,146 shares of common stock. The PIK Warrants have an exercise price of $0.96 per share, were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and have an expiration date of January 2, 2034.

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Revenue

3 Months Ended

Mar. 31, 2024

Revenue from Contract with Customer [Abstract]

Revenue

11. Revenue

Disaggregated Revenue

The following table shows the Company’s net revenue disaggregated into categories the Company considers meaningful:

	Three Months Ended March 31,
	2024
	US		International		Total
Net revenue by:
Product revenue
Capital equipment	$	2,236	$	617	$	2,853
Disposable		11,221		2,875		14,096
Subtotal product revenue		13,457		3,492		16,949
Lease revenue
Capital equipment		128		83		211
Other		387		96		483
Service and other revenue		1,112		379		1,491
Total net revenue	$	15,084	$	4,050	$	19,134

	Three Months Ended March 31,
	2023
	US		International		Total
Net revenue by:
Product revenue
Capital equipment	$	2,498	$	810	$	3,308
Disposable		9,348		3,069		12,417
Subtotal product revenue		11,846		3,879		15,725
Lease revenue
Capital equipment		38		92		130
Other		355		108		463
Service and other revenue		775		638		1,413
Total net revenue	$	13,014	$	4,717	$	17,731

United States and International net revenue is based on the customer location to which the product is shipped. No individual foreign country represents more than 10% of the Company’s aggregated revenue during the three months ended March 31, 2024 or 2023.

Contract Balances from Contracts with Customers

Contract liabilities consist of deferred revenue and other contract liabilities associated with rebates and fees payable to GPOs, IDNs and distributor partners. Deferred revenues are included in contract liabilities in the accompanying condensed consolidated balance sheets. The following table presents changes in contract liabilities during the three months ended March 31, 2024:

	Deferred Revenue			Other Contract Liabilities
Balance at December 31, 2023	$	1,041		$	196
Additions		464			209
Subtractions		(353	)		(196	)
Balance at March 31, 2024	$	1,152		$	209

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

12. Stock-Based Compensation

On February 27, 2024, the exercise price of all outstanding options to purchase shares of the Company’s common stock, other than options held by non-employee Board members, was reduced to $0.915 per share (the “Option Repricing”). No other terms of the options were modified. The Option Repricing includes vested and unvested options granted under the Vapotherm, Inc. Amended and Restated 2018 Equity Incentive Plan (as amended and restated, the “2018 Equity Plan”) and the Vapotherm, Inc. Amended and Restated 2015 Stock Incentive Plan and the Vapotherm, Inc. Amended and Restated 2005 Stock Incentive Plan. The 2018 Plan also was amended to increase the number of shares of common stock that may be issued in satisfaction of awards under the 2018 Plan by an additional 410,000 shares and was revised to reflect the effect of the Company’s 1-for-8 reverse stock split effected on August 18, 2023 (such plan as amended, the “Amended 2018 Equity Plan”). The Option Repricing resulted in the recognition of additional compensation expense of $0.1 million during the three months ended March 31, 2024.

As of March 31, 2024, 154,352 shares of common stock were available for issuance under the Amended 2018 Equity Plan, assuming actual performance under outstanding performance stock units. To date, stock options, performance awards, restricted stock awards, restricted stock units and performance stock units have been granted under the Amended 2018 Equity Plan.

Stock-based compensation expense was allocated based on the employees’ and non-employees’ functions as follows:

	Three Months Ended March 31,
	2024		2023
Cost of revenue	$	45	$	47
Research and development		508		596
Sales and marketing		762		1,114
General and administrative		519		1,063
Total	$	1,834	$	2,820

Stock Options

There were no options granted under the Amended 2018 Equity Plan during the three months ended March 31, 2024. The Company granted options to purchase an aggregate of 106,071 shares of common stock at exercise prices ranging from $9.68 to $21.60 per share, with a weighted average exercise price of $21.20 per share, during the three months ended March 31, 2023. The weighted average fair value of stock options granted during the three months ended March 31, 2023 was $17.44 per share.

The weighted average assumptions used in the Black-Scholes options pricing model for the three months ended March 31, 2023 are as follows:

Expected dividend yield	0.0%
Risk free interest rate	3.9%
Expected stock price volatility	103.8%
Expected term (years)	6.1

Restricted Stock Units

A summary of restricted stock unit activity for the three months ended March 31, 2024 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2023		682,832		$	12.43
Granted		54,337			0.99
Vested		(48,631	)		68.67
Canceled		(219	)		2.38
Unvested at March 31, 2024		688,319		$	7.56

Performance Stock Units

The Company has granted performance stock units. The quantity of shares that will ultimately vest and be issued upon settlement of the performance stock units range from 0% to 200% of a targeted number of shares and will be determined based on, and subject to, individual grant milestones.

A summary of performance stock units activity for the three months ended March 31, 2024 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2023		20,491		$	161.53
Vested		(573	)		15.84
Unvested at March 31, 2024		19,918		$	165.68

Employee Stock Purchase Plan

As of March 31, 2024, 157,829 shares of common stock remained available for issuance under the ESPP.

The ESPP provides for successive discrete offering periods of approximately six months or as determined by the plan administrator. The offering periods begin on each January 1st and July 1st or the first trading day thereafter.

The ESPP permits eligible employees to elect to purchase shares of common stock through fixed whole percentage contributions from eligible compensation during each offering period, not to exceed 10% of the eligible compensation a participant receives during an offering period and not to accrue at a rate which exceeds $25,000 of the fair value of the stock (determined on the grant date(s)) for each calendar year. A participant may purchase the lower of (a) a number of shares of common stock determined by dividing such participant’s accumulated payroll deductions on the exercise date by the option price, (b) 625 shares, or (c) such other lesser maximum number of shares as shall have been established by the plan administrator.

Amounts deducted and accumulated by the participant will be used to purchase shares of common stock at the end of each offering period. The purchase price of the shares will be 85% of the lower of the fair value of common stock on the first trading day of each offering period or on the purchase date. Participants may end their participation during an offering period up to ten days in

advance of the exercise date and will be paid their accumulated contributions that have not been used to purchase shares of common stock. Participation ends automatically upon termination of employment.

The fair value of the purchase right for the ESPP option is estimated on the date of grant using the Black-Scholes pricing model with the following assumptions during 2024:

Expected dividend yield	0.0%
Risk free interest rate	5.2%
Expected stock price volatility	117.6%
Expected term (years)	0.5

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Net Loss Per Share

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Net Loss Per Share

13. Net Loss Per Share

As of March 31, 2024 and 2023, the remaining outstanding pre-funded warrants to purchase 226,298 shares of common stock that were issued in connection with the February 2023 Private Placement were included in the basic and diluted net loss per share calculation.

The Company excluded the following potential shares of common stock, based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

	As of March 31,
	2024		2023
Warrants to purchase common stock		3,046,558		2,767,205
Options to purchase common stock		410,548		485,379
Unvested restricted stock units and    performance stock units		708,237		181,038
Employee stock purchase plan shares		15,625		26,971
		4,180,968		3,460,593

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Related Party Transactions

3 Months Ended

Mar. 31, 2024

Related Party Transactions [Abstract]

Related Party Transactions

14. Related Party Transactions

The Company recorded sales of $0.2 million and $1.1 million during of the three months ended March 31, 2024 and 2023, respectively, to an entity in which a member of the Company’s board of directors holds a management position. There was a credit of $0.2 million and $0.3 million due to this entity at March 31, 2024 and December 31, 2023, respectively.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The information included in these condensed consolidated financial statements on this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” in the Company’s 2023 Form 10-K and are updated, as necessary, in this report. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP.

Principles of Consolidation

Principles of Consolidation

These condensed consolidated financial statements include the accounts of the Company, which includes its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Segment Information

Segment Information

Operating segments are defined as components of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company globally manages the business within one reporting segment, Vapotherm, Inc., and two reporting units, Vapotherm and Vapotherm UK Ltd. (“Vapotherm UK”). Segment information is consistent with how the chief operating decision maker reviews the business, makes investing and resource allocation decisions and assesses operating performance.

As of March 31, 2024, the majority of the Company’s long-term assets are located in the United States. Long-term assets located outside the United States totaled $14.6 million, including $8.9 million located in Mexico, at March 31, 2024. Long-term assets located outside the United States totaled $14.9 million, including $9.9 million located in Mexico, at December 31, 2023.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. The Company evaluates its estimates on an ongoing basis. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant estimates relied upon in preparing these condensed consolidated financial statements include calculation of stock-based compensation, valuation of warrants, realizability of inventories, allowance for credit losses, accrued expenses, the valuation allowances against deferred income tax assets, and assessments of impairment with respect to long-lived and intangible assets, including goodwill. Actual results may differ from these estimates.

Reclassification

Reclassification

Certain amounts in 2023 have been reclassified to conform to the presentation in 2024. None of the reclassifications had any impact on the Company’s results of operations.

Unaudited Interim Financial Information

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2024, and the condensed consolidated statements of comprehensive loss, stockholders’ deficit and the condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments,

which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2024 and the results of its operations and cash flows for the three months ended March 31, 2024 and 2023. The financial data and other information disclosed in these notes related to the three months ended March 31, 2024 and 2023 are also unaudited. The results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Financial Instruments and Concentrations of Credit Risk

Financial Instruments and Concentrations of Credit Risk

As of March 31, 2024, the Company’s financial instruments included cash and cash equivalents, restricted cash, accounts receivable, accounts payable and debt, the carrying amounts of which approximated fair value due to their short-term nature or market interest rates. All of the Company’s cash and cash equivalents are maintained at creditworthy financial institutions. At March 31, 2024, deposits exceed the amount of any insurance provided and are exposed to credit loss.

The Company extends credit to customers in the normal course of business but typically does not require collateral or any other security to support amounts due. Management performs ongoing credit evaluations of its customers. The Company recognizes an allowance for credit losses equal to its current estimate of all contractual cash flows that the Company does not expect to collect. The Company’s estimate considers relevant information about past events, current conditions, and reasonable and supportable forecasts. Provisions for the allowance for credit losses are recorded in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive loss.

Supplier Risk

Supplier Risk

The Company obtains some of the components and subassemblies included in its High Velocity Therapy systems and its OAM from single source suppliers. The partial or complete loss of one or more of these suppliers could cause significant production delays, an inability to meet customer demand and a substantial loss in revenue.

Foreign Currency and Foreign Operations

Foreign Currency and Foreign Operations

The functional currency of the Company is the currency of the primary economic environment in which the entity operates, which is the U.S. dollar. For the Company’s non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign currency exchange rates for the period. Adjustments resulting from the translation of the financial statements of its foreign operations into U.S. dollars are excluded from the determination of net loss and are recorded in accumulated other comprehensive income (loss), a separate component of stockholders’ deficit.

Realized foreign currency gains or losses arising from transactions denominated in foreign currencies are recorded in other (expense) income in the condensed consolidated statements of comprehensive loss. Unrealized foreign currency gains or losses arising from transactions denominated in foreign currencies are recorded in accumulated other comprehensive income (loss).

Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid temporary investments purchased with original maturities of 90 days or less to be cash equivalents. The Company holds restricted cash and restricted cash equivalents related to certificates of deposits and collateral in relation to lease agreements. As of March 31, 2024, $0.9 million of the Company’s $4.4 million of cash, cash equivalents and restricted cash balance was located outside the United States. As of December 31, 2023, $1.9 million of the Company’s $10.8 million of cash, cash equivalents and restricted cash balance was located outside of the United States. The Company’s cash, cash equivalents

and restricted cash balances are primarily held by Canadian Imperial Bank of Commerce Innovation Banking (“CIBC”) and Bank of America, N.A.

The following table presents the components of total cash, cash equivalents, and restricted cash as set forth in the Company’s condensed consolidated statements of cash flows:

	March 31, 2024		December 31, 2023
Cash and cash equivalents	$	3,304	$	9,725
Restricted cash		1,109		1,109
Total cash, cash equivalents, and restricted cash	$	4,413	$	10,834

Leases

Leases

The Company’s operating leases primarily consist of real estate leases for office, manufacturing, research and development, and warehouse space, as well as certain vehicle and equipment leases. Accounting Standards Codification (“ASC”), Leases (“ASC 842”) requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset, subject to certain permitted accounting policy elections. Under ASC 842, the Company determines whether a contract is or contains a lease at the inception of the contract. This determination is based on whether the contract provides the Company the right to control the use of a physically distinct asset and substantially all of the capacity of an asset. Leases with an initial noncancelable term of twelve months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise are classified as short-term leases. The Company has elected as an accounting policy to exclude from the consolidated balance sheets the right-of-use assets and lease liabilities related to short-term leases. The Company recognizes rent expense for its operating leases on a straight-line basis over the term of the lease.

Certain of the Company’s leases include options to extend or terminate the lease at its sole discretion. The Company does not consider in the measurement of right-of-use assets and lease liabilities an option to extend or terminate a lease if the Company is not reasonably certain to exercise the option. Certain of the Company’s leases include covenants that oblige the Company, at its sole expense, to repair and maintain the leased asset periodically during the lease term. The Company is not a party to any leases that contain residual value guarantees.

Many of the Company’s leases include fixed and variable payments. Among other charges, variable payments related to real estate leases include real estate taxes, insurance, operating expenses, and common area maintenance, which are usually billed at actual amounts incurred proportionate to the Company’s rented square feet of the building. Variable payments related to vehicle and equipment leases relate to usage of the underlying asset, sales and use tax, and value-added tax. Variable payments that do not depend on an index or rate are expensed as incurred and are not included in the measurement of the lease liability.

In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. buildings, vehicles, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). The fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated to the lease components and non-lease components based on their relative fair values. The Company elected the accounting policy to not separate lease and non-lease components for its real estate, vehicle, and equipment leases. Therefore, each lease component and the related non-lease components and non-components are accounted for together as a single component.

The Company measures its lease liability for each leased asset as the present value of lease payments, as defined in ASC 842, discounted using a discount rate specific to the terms of the underlying lease. The Company’s right-of-use assets are equal to the related lease liabilities, adjusted for lease incentives received including tenant improvement allowances, initial direct costs incurred related to the lease, and payments made to the lessor prior to the lease commencement date. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company estimates its incremental borrowing rate for each leased asset based on the interest rate the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

When impairment indicators are present, the Company evaluates the recoverability of its right-of-use assets. If the assessment indicates an impairment, the affected assets are written down to fair value (see Note 9).

Product Warranty

Product Warranty

The Company provides its customers with a standard one-year warranty on its capital equipment sales. Warranty costs are accrued based on actual historical trends and estimated at the time of sale. The warranty liability is included within accrued expenses and other current liabilities in the condensed consolidated balance sheets. A roll-forward of the Company’s warranty liability from December 31, 2023 to March 31, 2024 is as follows:

Balance at December 31, 2023	$	303
Provisions for warranty obligations		(5	)
Settlements		(57	)
Balance at March 31, 2024	$	241

Revenue Recognition

Revenue Recognition

The Company’s revenue is primarily derived from the sale of products, leases and services. Product revenue consists of capital equipment and single-use disposables that are shipped and billed to customers both domestically and internationally. The Company’s main capital equipment products are the High Velocity Therapy systems. The Company’s main disposable products are single-use disposables and nasal interfaces, or cannulas, and adaptors. Lease revenue consists of two components which include capital equipment that the Company leases to its customers and, in certain situations, an allocation from disposable revenue to other lease revenue upon the sale of disposable products in bundled arrangements involving the placement of the High Velocity Therapy capital units for use by the customer at no upfront charge in connection with the customer’s ongoing purchase of disposable products. Service revenue consists of fees associated with routine service of capital units and the sale of extended service contracts and preventative maintenance plans, which are purchased by a small portion of the Company’s customer base. In addition, the Company sells small quantities of component parts in the United States, United Kingdom, and to third-party international service centers who provide service on the High Velocity Therapy capital units outside of the United States and United Kingdom. Freight revenue is based upon actual freight costs plus a percentage markup of such costs associated with the shipment of products domestically, and to a lesser extent, internationally, and is included in service revenue. Rebates and fees consist of contractually obligated administrative fees and percentage-of-sales rebates paid to Group Purchasing Organizations (“GPOs”), Integrated Delivery Networks (“IDNs”) and distributor partners and are accounted for as a reduction to the corresponding revenue category.

Under the Financial Accounting Standard Board’s (“FASB”) ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and assesses whether each promised good or service is distinct and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value-added, and other taxes collected on behalf of third parties are excluded from revenue. The Company’s standard payment terms are generally 30 days from the date of sale.

Contracts with customers may contain multiple performance obligations. For such arrangements, the transaction price is allocated to each performance obligation based on the estimated relative stand-alone selling prices of the promised products or services underlying each performance obligation. The Company determines stand-alone selling prices based on the price at which the performance obligation is sold separately. If the stand-alone selling price is not observable through past transactions, the Company estimates the stand-alone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Revenue is generally recognized when the customer obtains control of the Company’s product, which generally occurs at a point in time upon shipment based on the contractual shipping terms of a contract.

Product and service revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, the Company

estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value amount method to which the Company expects to be entitled. As such, revenue on sales is recorded net of prompt pay discounts and payments made to GPOs, IDNs and distributors. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Determination of whether to include estimated amounts in the transaction price is based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. The Company believes that the estimates it has established are reasonable based upon current facts and circumstances. Applying different judgments to the same facts and circumstances could result in different estimates.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying a practical expedient under ASC 606, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component during the three months ended March 31, 2024 or 2023.

The Company’s contracts with its customers generally have a duration of less than one year. Therefore, the Company has elected to apply a practical expedient and recognizes the incremental costs of obtaining contracts as an expense. These costs are included in sales and marketing expenses in the accompanying condensed consolidated statements of comprehensive loss.

Lease Revenue

Lease Revenue

The Company also enters into agreements to lease its capital equipment. For such sales, the Company accounts for revenue under ASC 842, and assesses and classifies these transactions as sales-type or operating leases based on whether the lease transfers ownership of the equipment to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term. Equipment included in arrangements including transfer of title are accounted for as sales-type leases and the Company recognizes the present value of the lease payments due over the lease term as revenue at the inception of the lease. The Company records the present value of future lease payments in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets; these amounts each totaled $0.1 million at March 31, 2024 and December 31, 2023. Equipment included in arrangements that do not include the transfer of title, nor any of the sales-type or direct financing lease criteria, are accounted for as operating leases and revenue is recognized on a straight-line basis over the term of the lease.

The Company also enters into agreements involving the placement of its High Velocity Therapy capital units for use by the customer at no upfront charge in connection with the customer’s ongoing purchase of disposable products. In these bundled arrangements, revenue recognized for the sale of the disposables is allocated between disposable revenue and other lease revenue based on the estimated relative stand-alone selling prices of the individual performance obligations.

Shipping and Handling Costs

Shipping and Handling Costs

Amounts billed to customers for shipping and handling are included in service revenue. Shipping and handling costs are included in cost of revenue. Shipping and handling activities are accounted for as activities to fulfill a contract and are accrued when the customer obtains control of the Company’s product. The total costs of shipping and handling for the three months ended March 31, 2024 and 2023 were $0.2 million and $0.3 million, respectively.

Sales and Value-Added Taxes

Sales and Value-Added Taxes

When required by local jurisdictions, the Company bills its customers for sales tax and value-added tax calculated on each sales invoice and records a liability for the sales and value-added tax payable, which is included in accrued expenses and other current liabilities in the condensed consolidated balance sheets. Sales tax and value-added tax billed to a customer are not included in the Company’s revenue.

Stock-Based Compensation

Stock-Based Compensation

The Company maintains an equity incentive plan to provide long-term incentives for employees, consultants, and members of the board of directors. The plan allows for the issuance of non-statutory and incentive stock options, restricted stock, unrestricted

stock, stock units, including restricted stock units and performance stock units, and stock appreciation rights to employees, consultants and non-employee directors. The Company recognizes stock-based compensation expense for awards of equity instruments to employees and non-employees based on the grant date fair value of those awards in accordance with ASC Topic 718, Stock Compensation (“ASC 718”). ASC 718 requires all equity-based compensation awards, including grants of restricted stock, restricted stock units, performance stock units and stock options, to be recognized as expense in the condensed consolidated statements of comprehensive loss based on their grant date fair values.

The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model. The fair value of restricted stock and restricted stock units is measured at the market value of the related shares of the Company’s common stock on the grant date. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period and is generally three to four years. For performance-based awards, the related compensation cost is amortized over the performance period on an accelerated attribution basis. Compensation cost associated with performance awards is based on fair value on the date of grant and the number of units expected to be earned after assessing the probability that certain performance criteria will be met and the associated targeted payout level that is forecasted will be achieved. Cumulative adjustments are recorded each quarter to reflect estimated outcomes of the performance-related conditions until the results are determined and settled. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including the expected life (weighted average period of time that the options granted are expected to be outstanding), the volatility of the Company’s common stock and an assumed risk-free interest rate. Expected volatility is based on the historical volatility of the Company’s common stock. The expected life is estimated using the historical life of options issued under the Company’s equity plan. The risk-free interest rate is based on U.S. Treasury rates with a remaining term that approximates the expected life assumed at the date of grant. No dividend yield is assumed as the Company does not pay, and does not expect to pay, dividends on its common stock. The Company estimates forfeitures based on historical experience with pre-vested forfeitures. To the extent actual forfeitures differ from the estimate, the difference is recorded to compensation expense in the period of the forfeiture.

The Company recognizes stock-based compensation expense for shares of its common stock issued pursuant to the Vapotherm, Inc. 2018 Employee Stock Purchase Plan (“ESPP”) on a straight-line basis over the related offering period. The Company estimates the fair value of shares to be issued under the ESPP based on a combination of options valued using the Black-Scholes option pricing model. The expected life is determined based on the contractual term. Dividend yield, risk-free interest rate, forfeiture rates, and expected volatility are estimated in a manner similar to option grants described above.

Income Tax

Income Tax

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the condensed consolidated financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial reporting and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the condensed consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the condensed consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

The Company’s major tax jurisdictions are the state of New Hampshire, the United States, United Kingdom, Germany, Mexico, Singapore, and Brazil. The provision for income taxes for each of the three months ended March 31, 2024 and 2023 totaled less than $0.1 million, and related to income earned by the Company’s foreign subsidiaries after accounting for transfer pricing adjustments.

Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and tax credit carryforwards that can be utilized to offset future taxable income and reduce taxes, respectively. The Company has not currently completed an evaluation of ownership changes through December 31, 2023 to assess whether utilization of the Company’s net operating loss and tax credit carryforwards would be subject to an annual limitation under Sections 382 and 383 of the Code. To the extent an ownership change is determined to have occurred under Sections 382 and 383 of the Code, the net operating loss and tax credit carryforwards may be subject to limitation.

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

Improvements to Reportable Segment Disclosures (Topic 280):

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses and segment-related data. For public companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.

Improvements to Income Tax Disclosure (Topic 740):

In December 2023, the FASB issued ASU No. 2023-09, Income Tax (Topic 740) - Improvements to Income Tax Disclosures which requires companies to break out their income tax expense, income tax rate reconciliation and income tax payments made in more detail. For public companies, the requirements will become effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect this ASU to have a material effect on its consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Components of Cash, Cash Equivalents and Restricted Cash

The following table presents the components of total cash, cash equivalents, and restricted cash as set forth in the Company’s condensed consolidated statements of cash flows:

	March 31, 2024		December 31, 2023
Cash and cash equivalents	$	3,304	$	9,725
Restricted cash		1,109		1,109
Total cash, cash equivalents, and restricted cash	$	4,413	$	10,834

Summary of Roll-Forward Warranty Liability

A roll-forward of the Company’s warranty liability from December 31, 2023 to March 31, 2024 is as follows:

Balance at December 31, 2023	$	303
Provisions for warranty obligations		(5	)
Settlements		(57	)
Balance at March 31, 2024	$	241

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Schedule of Assumptions Used in Black-Scholes Options Pricing Model at the Date of Grant

The fair value of the warrants are estimated on the date of grant using the Black-Scholes pricing model with the following range of assumptions:

	2024	2023
Expected dividend yield	0.0%	0.0%
Risk free interest rate	4.1%-4.5%	4.0%-4.6%
Expected stock price volatility	20.8%-21.0%	20.8%-20.9%
Expected term (years)	2.5	2.5

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Accounts Receivable (Tables)

3 Months Ended

Mar. 31, 2024

Receivables [Abstract]

Summary of Accounts Receivable

Accounts receivable consists of the following:

	March 31, 2024			December 31, 2023
United States	$	6,854		$	6,837
International		3,578			3,995
Total accounts receivable		10,432			10,832
Less: Allowance for expected credit losses		(229	)		(160	)
Accounts receivable, net of expected credit losses	$	10,203		$	10,672

Summary of Allowance for Credit Losses

A roll-forward of the Company’s allowance for credit losses from December 31, 2023 to March 31, 2024 is as follows:

Balance at December 31, 2023	$	160
Change in provision for credit losses		69
Write-offs of uncollectible balances		-
Balance at March 31, 2024	$	229

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Inventories (Tables)

3 Months Ended

Mar. 31, 2024

Inventory Disclosure [Abstract]

Schedule of Inventory Balances, Net of Reserves

Inventory balances, net of reserves, consist of the following:

	March 31, 2024		December 31, 2023
Raw materials	$	12,050	$	11,982
Finished goods		11,509		9,954
Component parts		504		1,032
Total inventories	$	24,063	$	22,968

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Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities (Tables)

3 Months Ended

Mar. 31, 2024

Payables and Accruals [Abstract]

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

	March 31, 2024		December 31, 2023
Accrued term loan fees	$	8,760	$	-
Operating lease liabilities, current portion		2,377		2,414
Accrued inventories		1,193		596
Accrued income, sales and other taxes		1,100		997
Accrued bonuses		1,056		1,927
Accrued payroll and employee-related costs		1,023		781
Accrued interest		867		847
Accrued commissions		640		548
Accrued professional fees		550		617
Accrued supplier costs		450		450
Accrued vacation liability		408		494
Product warranty reserve		241		303
Accrued freight		222		243
Accrued rent and restoration costs		-		489
Other		1,644		2,099
Total accrued expenses and other current liabilities	$	20,531	$	12,805

Schedule of Other Long-term Liabilities

Other long-term liabilities consist of the following:

	March 31, 2024		December 31, 2023
Operating lease liabilities	$	2,521	$	2,919
Accrued term loan fees		-		3,874
Other		4		4
Total other long-term liabilities	$	2,525	$	6,797

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Debt (Tables)

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Schedule of Annual Principal Maturities of Term Loans

The annual principal maturities of the Company’s Seventh Amended SLR Loan Agreement as of March 31, 2024 are as follows:

2024 (remaining 9 months)	$	113,836
Less: Unamortized deferred financing costs		(2,166	)
Loans payable, net	$	111,670

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Summary of Operating Lease Cost and Information Related to Operating Lease Liabilities

The following table presents operating lease cost and information related to operating right-of-use and operating lease liabilities for the periods indicated:

	Three Months Ended March 31,
	2024			2023
Operating lease cost	$	348		$	568
Variable lease cost		115			103
Total	$	463		$	671
Operating cash flow impacts:
Cash paid for amounts included in measurement of lease   liabilities	$	753		$	766
Weighted average remaining lease term - operating leases   (in years)		3.4			3.7
Weighted average discount rate - operating leases		10.4	%		9.2	%

Summary of Future Maturities of Lease Liabilities under Noncancelable Operating Leases

As of March 31, 2024, future maturities of lease liabilities under the Company’s noncancelable operating leases are as follows:

	Total Due
2024 (remaining 9 months)	$	2,259
2025		1,177
2026		811
2027		525
2028		481
Thereafter		655
Total payments		5,908
Less interest		(1,010	)
Total present value of lease payments	$	4,898

Summary of Non-Cancellable Purchase Commitments

As of March 31, 2024, the Company has non-cancellable purchase commitments for inventories, capital equipment and services as follows:

	Total Due
2024 (remaining 9 months)	$	7,656
2025		1,593
2026		38
	$	9,287

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Restructuring (Tables)

3 Months Ended

Mar. 31, 2024

Restructuring and Related Activities [Abstract]

Summary of Classification of Restructuring Expense, Including Related Impairment of Right-of-use Assets

The following table summarizes the classification of restructuring expense, including related impairment of right-of-use assets, in the condensed consolidated statements of comprehensive loss during the three months ended March 31, 2023:

Cost of revenue	$	56
Impairment of long-lived and intangible assets		432
Total restructuring expense	$	488

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Warrants (Tables)

3 Months Ended

Mar. 31, 2024

Warrants and Rights Note Disclosure [Abstract]

Summary of Warrants Activity

The table below sets forth the Company’s warrant activity for the three months ended March 31, 2024:

	Common Stock Warrants
	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2023		3,193,710	$	8.36
Warrants issued		79,146		0.96
Outstanding at March 31, 2024		3,272,856	$	8.18

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Revenue (Tables)

3 Months Ended

Mar. 31, 2024

Revenue from Contract with Customer [Abstract]

Net Revenue Disaggregated into Categories

Disaggregated Revenue

The following table shows the Company’s net revenue disaggregated into categories the Company considers meaningful:

	Three Months Ended March 31,
	2024
	US		International		Total
Net revenue by:
Product revenue
Capital equipment	$	2,236	$	617	$	2,853
Disposable		11,221		2,875		14,096
Subtotal product revenue		13,457		3,492		16,949
Lease revenue
Capital equipment		128		83		211
Other		387		96		483
Service and other revenue		1,112		379		1,491
Total net revenue	$	15,084	$	4,050	$	19,134

	Three Months Ended March 31,
	2023
	US		International		Total
Net revenue by:
Product revenue
Capital equipment	$	2,498	$	810	$	3,308
Disposable		9,348		3,069		12,417
Subtotal product revenue		11,846		3,879		15,725
Lease revenue
Capital equipment		38		92		130
Other		355		108		463
Service and other revenue		775		638		1,413
Total net revenue	$	13,014	$	4,717	$	17,731

Schedule of Changes in Contract Liabilities

The following table presents changes in contract liabilities during the three months ended March 31, 2024:

	Deferred Revenue			Other Contract Liabilities
Balance at December 31, 2023	$	1,041		$	196
Additions		464			209
Subtractions		(353	)		(196	)
Balance at March 31, 2024	$	1,152		$	209

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2024

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Summary of Allocated Stock Based Compensation Expense

Stock-based compensation expense was allocated based on the employees’ and non-employees’ functions as follows:

	Three Months Ended March 31,
	2024		2023
Cost of revenue	$	45	$	47
Research and development		508		596
Sales and marketing		762		1,114
General and administrative		519		1,063
Total	$	1,834	$	2,820

Schedule of Weighted Average Assumptions Used in Black-Scholes Options Pricing Model

The weighted average assumptions used in the Black-Scholes options pricing model for the three months ended March 31, 2023 are as follows:

Expected dividend yield	0.0%
Risk free interest rate	3.9%
Expected stock price volatility	103.8%
Expected term (years)	6.1

Schedule of Fair Value of ESPP Used in Black-Scholes Options Pricing Model

The fair value of the purchase right for the ESPP option is estimated on the date of grant using the Black-Scholes pricing model with the following assumptions during 2024:

Expected dividend yield	0.0%
Risk free interest rate	5.2%
Expected stock price volatility	117.6%
Expected term (years)	0.5

Restricted Stock Units

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Summary of Restricted Stock Units, Restricted Stock Awards and Performance Stock Units

A summary of restricted stock unit activity for the three months ended March 31, 2024 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2023		682,832		$	12.43
Granted		54,337			0.99
Vested		(48,631	)		68.67
Canceled		(219	)		2.38
Unvested at March 31, 2024		688,319		$	7.56

Performance Stock Units

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Summary of Restricted Stock Units, Restricted Stock Awards and Performance Stock Units

A summary of performance stock units activity for the three months ended March 31, 2024 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2023		20,491		$	161.53
Vested		(573	)		15.84
Unvested at March 31, 2024		19,918		$	165.68

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Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Schedule of Computation of Diluted Net Loss Per Share

The Company excluded the following potential shares of common stock, based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

	As of March 31,
	2024		2023
Warrants to purchase common stock		3,046,558		2,767,205
Options to purchase common stock		410,548		485,379
Unvested restricted stock units and    performance stock units		708,237		181,038
Employee stock purchase plan shares		15,625		26,971
		4,180,968		3,460,593

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Description of Business - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 26, 2024	Feb. 21, 2024	Dec. 31, 2023	Feb. 10, 2023	Dec. 31, 2022	Nov. 22, 2022	Sep. 30, 2022
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Common stock, shares authorized	21,875,000				21,875,000
Cash, cash equivalents and restricted cash balance	$ 4,413	$ 26,822			$ 10,834		$ 16,847
Working Capital	(96,400)
Outstanding debt under loan agreement	113,800
Accumulated deficit	(563,031)				$ (548,195)
Net loss	(14,836)	(18,090)
Cash flow deficit from operations	$ (6,557)	$ (10,034)
Pre-Funded Warrants
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Warrants to purchase share of common stock	226,298	226,298
SLR Investment Corporation ("SLR")
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Minimum liquidity covenant	$ 5,000							$ 5,000	$ 20,000
Percentage of Paid In Kind Interest Rate			9.00%			9.00%
SLR Investment Corporation ("SLR") | Maximum [Member]
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Percentage of Paid In Kind Interest Rate			9.00%	9.00%		9.00%		8.00%
SLR Investment Corporation ("SLR") | SLR Term B Loan Facility
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Term B facility Amount	$ 2,000		$ 4,000
SLR Investment Corporation ("SLR") | SLR Term B Loan Facility | Maximum [Member]
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Percentage of Paid In Kind Interest Rate			9.00%

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Summary of Significant Accounting Policies - Additional Information (Details)	3 Months Ended
	Mar. 31, 2024 USD ($) Segment Reportingunit	Mar. 31, 2023 USD ($)	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Number of reporting segment | Segment	1
Number of reporting units | Reportingunit	2
Maturity period of highly liquid investments with original maturities	90 days
Cash, cash equivalents and restricted cash balance	$ 4,413,000	$ 26,822,000	$ 10,834,000	$ 16,847,000
Standard product warranty period	1 year
Standard payment term to customer	30 days
Revenue, performance obligation, description of payment terms	When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying a practical expedient under ASC 606, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less.
Revenue	$ 19,134,000	17,731,000
Revenue, remaining performance obligation, amount	$ 0	$ 0
Dividend yield assumed	0.00%	0.00%
Provision (benefit) for income taxes	$ 11,000	$ 9,000
Minimum
Summary Of Significant Accounting Policies [Line Items]
Vesting period	3 years
Maximum
Summary Of Significant Accounting Policies [Line Items]
Vesting period	4 years
Provision (benefit) for income taxes	$ 100,000	100,000
Shipping and Handling
Summary Of Significant Accounting Policies [Line Items]
Shipping and handling costs	200,000	$ 300,000
Prepaid Expenses and Other Current Assets
Summary Of Significant Accounting Policies [Line Items]
Current value of future lease payments	100,000		100,000
Outside U.S.
Summary Of Significant Accounting Policies [Line Items]
Long-term assets	14,600,000		14,900,000
Cash, cash equivalents and restricted cash balance	900,000		1,900,000
Mexico
Summary Of Significant Accounting Policies [Line Items]
Long-term assets	$ 8,900,000		$ 9,900,000

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Summary of Significant Accounting Policies - Components of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023	Mar. 31, 2023	Dec. 31, 2022
Accounting Policies [Abstract]
Cash and cash equivalents	$ 3,304	$ 9,725
Restricted cash	1,109	1,109
Total cash, cash equivalents, and restricted cash	$ 4,413	$ 10,834	$ 26,822	$ 16,847

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Summary of Significant Accounting Policies - Summary of Roll-Forward Warranty Liability (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2024 USD ($)
Accounting Policies [Abstract]
Balance, beginning of period	$ 303
Provisions for warranty obligations	(5)
Settlements	(57)
Balance, end of period	$ 241

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Fair Value Measurements - Additional Information (Details) - USD ($)	Mar. 31, 2024	Dec. 31, 2023	Mar. 31, 2023
Class Of Warrant Or Right [Line Items]
Fair value, assets, transfers in and out of level 1, 2 or 3	$ 0
Common Stock Warrants
Class Of Warrant Or Right [Line Items]
Warrants exercise price	$ 8.18	$ 8.36
Financing Arrangement | Common Stock Warrants
Class Of Warrant Or Right [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	79,146		13,547
Level 1 | Money Market Deposits | Maximum
Class Of Warrant Or Right [Line Items]
Cash equivalents	$ 100,000

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Fair Value Measurements - Schedule of Assumptions Used in Black-Scholes Options Pricing Model at the Date of Grant (Details)	Mar. 31, 2024	Mar. 31, 2023
Expected Dividend Yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Key inputs used in valuation	0.0	0.0
Risk Free Interest Rate | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Key inputs used in valuation	4.5	4.6
Risk Free Interest Rate | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Key inputs used in valuation	4.1	4.0
Expected Stock Price Volatility | Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Key inputs used in valuation	21.0	20.9
Expected Stock Price Volatility | Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Key inputs used in valuation	20.8	20.8
Expected Term
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected term (years)	2 years 6 months	2 years 6 months

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Accounts Receivable - Summary of Accounts Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Accounts Notes And Loans Receivable [Line Items]
Total accounts receivable	$ 10,432	$ 10,832
Less: Allowance for expected credit losses	(229)	(160)
Accounts receivable, net of expected credit losses	10,203	10,672
United States
Accounts Notes And Loans Receivable [Line Items]
Total accounts receivable	6,854	6,837
International
Accounts Notes And Loans Receivable [Line Items]
Total accounts receivable	$ 3,578	$ 3,995

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Accounts Receivable - Summary of Allowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Accounts Notes And Loans Receivable [Line Items]
Balance at December 31,2022	$ 160
Change in provision for credit losses	69	$ 49
Balance at June 30, 2023	229
Uncollectible Balances
Accounts Notes And Loans Receivable [Line Items]
Write-offs of uncollectible balances	$ 0

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Accounts Receivable - Additional Information (Details) - Customer	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Net Revenue | Customer Concentration Risk | Customer
Accounts Notes And Loans Receivable [Line Items]
Number of customer accounted more than 10%	0	0
Accounts Receivable | Credit Concentration Risk
Accounts Notes And Loans Receivable [Line Items]
Number of customer accounted more than 10%	0		1

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Inventories - Schedule of Inventory Balances, Net of Reserves (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Inventory Disclosure [Abstract]
Raw materials	$ 12,050	$ 11,982
Finished goods	11,509	9,954
Component parts	504	1,032
Total inventories	$ 24,063	$ 22,968

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Inventories - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Inventory Disclosure [Abstract]
Provision for excess and obsolete inventory	$ 0	$ 200,000

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Goodwill and Intangible Assets - Schedule of Changes in Carrying Amount of Goodwill (Details) $ in Thousands	Mar. 31, 2024 USD ($)
Goodwill
Beginning Balance	$ 565
Ending Balance	$ 560

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Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2024	Dec. 31, 2023
Acquired Finite Lived Intangible Assets [Line Items]
Goodwill		$ 560	$ 565
Impairment of long-lived and intangible assets	$ 432

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Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Payables and Accruals [Abstract]
Accrued term loan fees	$ 8,760
Operating lease liabilities, current portion	$ 2,377	$ 2,414
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Total accrued expenses and other current liabilities	Total accrued expenses and other current liabilities
Accrued inventories	$ 1,193	$ 596
Accrued income, sales and other taxes	1,100	997
Accrued bonuses	1,056	1,927
Accrued payroll and employee-related costs	1,023	781
Accrued interest	867	847
Accrued commissions	640	548
Accrued professional fees	550	617
Accrued supplier costs	450	450
Accrued vacation liability	408	494
Product warranty reserve	241	303
Accrued freight	222	243
Accrued rent and restoration costs		489
Other	1,644	2,099
Total accrued expenses and other current liabilities	$ 20,531	$ 12,805

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Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities - Schedule of Other Long-term Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Payables and Accruals [Abstract]
Operating lease liabilities	$ 2,521	$ 2,919
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Total other long-term liabilities	Total other long-term liabilities
Accrued term loan fees		$ 3,874
Other	$ 4	4
Total other long-term liabilities	$ 2,525	$ 6,797

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Debt - Additional Information (Details) - USD ($)				3 Months Ended
	Mar. 26, 2024	Apr. 17, 2023	Feb. 10, 2023	Mar. 31, 2024	Mar. 31, 2023	Apr. 26, 2024	Feb. 21, 2024	Nov. 22, 2022	Sep. 30, 2022	Feb. 18, 2022
Debt Instrument [Line Items]
Payment of direct financing costs				$ 250,000
SLR Investment Corporation ("SLR")
Debt Instrument [Line Items]
Warrants exercise price			$ 9.36
Subsidiary operating account balance		$ 250,000
Debt instrument, covenant description				The events of default under the Seventh Amended SLR Loan Agreement include, without limitation, and subject to customary grace periods, (1) the Company’s failure to make any payments of principal or interest under the Seventh Amended SLR Loan Agreement or any other loan documents, (2) the Company’s breach or default in the performance of any covenant under the Seventh Amended SLR Loan Agreement, (3) the occurrence of a material adverse effect or an event that is reasonably likely to result in a material adverse effect, (4) the existence of an attachment or levy on a material portion of the Company’s funds or of the Company’s subsidiaries, (5) the Company’s insolvency or bankruptcy, or (6) the occurrence of certain material defaults with respect to any other of the Company’s indebtedness in excess of $500,000. If an event of default occurs, SLR is entitled to take enforcement action, including an incremental 5% interest rate increase or acceleration of amounts due under the Seventh Amended SLR Loan Agreement (the “Mandatory Prepayment Option”). The Company determined the Mandatory Prepayment Option to be an embedded derivative that is required to be bifurcated from the Seventh Amended SLR Loan Agreement. The Company determined the probability of SLR exercising the Mandatory Prepayment Option due to the Company’s continuing noncompliance with the Liquidity Covenant to be remote and deemed its fair value to be immaterial as of March 31, 2024. The Company re-evaluates the fair value of the Mandatory Prepayment Option at the end of each reporting period.
Minimum amount of other indebtedness				$ 500,000
Minimum liquidity covenant				$ 5,000,000				$ 5,000,000	$ 20,000,000
Increase in incremental interest rate				5.00%
Percentage of paid in kind interest rate	9.00%		9.00%
Paid in kind interest percentage in fee payment							10.00%	10.00%
Paid in kind interest percentage in issuance of warrants							9.00%	5.00%
Amount paid in kind interest rate				$ 2,500,000	$ 2,100,000
Percentage of increase in paid in kind interest rate			1.00%
Strike price for warrants description			The Fourth Amendment also provided for a reset of the exercise price of the warrants to be issued in connection with the Company’s election of PIK Interest, including existing PIK Warrants, equal to the lower of the Company’s closing stock price for (a) the 10-day trailing average closing price ending on the day before the interest payment date, (b) the day before the interest payment date, or (c) $9.36 per share.
Payment of direct financing costs				2,200,000
Liquidity covenant unrestricted cash balance				5,000,000
SLR Investment Corporation ("SLR") | Warrants
Debt Instrument [Line Items]
Increase in percentage of times warrants issued option one			5.00%
Percentage of paid in kind interest rate option one			4.00%
Increase in percentage of times warrants granted option two			12.20%
Percentage of paid in kind interest rate option two			5.00%
Percentage of paid in kind interest provide for weighted average			9.00%
SLR Investment Corporation ("SLR") | Maximum
Debt Instrument [Line Items]
Percentage of paid in kind interest rate	9.00%		9.00%				9.00%	8.00%
SLR Investment Corporation ("SLR") | SLR Term A Loan Facility
Debt Instrument [Line Items]
Outstanding balance under loan				$ 111,800,000						$ 100,000,000
Warrants to purchase share of common stock										13,421
Warrants exercise price										$ 111.76
Debt instrument, interest rate				14.72%
Loan agreement, payment terms				The Term A Loan Facility provides for interest-only payments for the first 48 months following the Effective Date. Thereafter, principal payments on the Term A Loan Facility are due monthly in 12 equal installments; provided that the Company has the option to extend the interest-only period for an additional 12 months upon achievement of a certain minimum revenue level as more fully described in the Seventh Amended SLR Loan Agreement.
Percentage of paid in kind interest rate option one	4.00%
Percentage of paid in kind interest rate option two	0.00%
SLR Investment Corporation ("SLR") | SLR Term A Loan Facility | Minimum
Debt Instrument [Line Items]
Debt instrument rate	8.30%
Debt instrument, interest rate	1.00%
SLR Investment Corporation ("SLR") | SLR Term A Loan Facility | Maximum
Debt Instrument [Line Items]
Debt instrument rate	9.30%
SLR Investment Corporation ("SLR") | SLR Term A Loan Facility | 1-month CME Term SOFR
Debt Instrument [Line Items]
Debt instrument rate	0.10%
SLR Investment Corporation ("SLR") | SLR Term B Loan Facility
Debt Instrument [Line Items]
Outstanding balance under loan	$ 4,000,000			$ 2,000,000
Debt instrument, interest rate				13.82%
Paid in kind interest percentage in fee payment	10.00%
Paid in kind interest percentage in issuance of warrants	9.00%
Payment of aggregate principal amount percentage	0.20%
Amendment effective date aggregate principal amount	$ 2,000,000
SLR Investment Corporation ("SLR") | SLR Term B Loan Facility | Subsequent Events
Debt Instrument [Line Items]
Outstanding balance under loan						$ 1,000,000
SLR Investment Corporation ("SLR") | SLR Term B Loan Facility | Minimum
Debt Instrument [Line Items]
Debt instrument, interest rate	0.10%
SLR Investment Corporation ("SLR") | SLR Term B Loan Facility | Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate	8.30%
Percentage of paid in kind interest rate	9.00%
SLR Investment Corporation ("SLR") | SLR Term B Loan Facility | 1-month CME Term SOFR
Debt Instrument [Line Items]
Debt instrument rate		0.10%
Third Parties
Debt Instrument [Line Items]
Payment of direct financing costs				$ 1,600,000
After February 18, 2024 but on or prior to February 1, 2027 | SLR Investment Corporation ("SLR") | SLR Term A Loan Facility
Debt Instrument [Line Items]
Percentage of prepayment charge	1.00%
Facility Exit Fee | SLR Term B Loan Facility | Maximum
Debt Instrument [Line Items]
Facility exit fee	$ 100,000
Facility Exit Fee | SLR Investment Corporation ("SLR")
Debt Instrument [Line Items]
Facility exit fee payable, percentage on aggregate principal amount	7.45%
Facility exit fee	$ 7,500,000

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Debt - Schedule of Annual Principal Maturities of Term Loans (Details) $ in Thousands	Mar. 31, 2024 USD ($)
Debt Instrument [Line Items]
Long-term loans payable,net	$ 113,800
Loans Payable | SLR Investment Corp ("SLR")
Debt Instrument [Line Items]
2023 (remaining 6 months)	113,836
Less: Unamortized deferred financing costs	(2,166)
Long-term loans payable,net	$ 111,670

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Commitments and Contingencies - Additional Information (Details) $ in Millions	Mar. 31, 2024 USD ($)
Loss Contingencies [Line Items]
Obligation outstanding under guaranty agreement	$ 1.3

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Commitments and Contingencies - Summary of Operating Right of Use and Operating Lease Cost and Information Related to Operating Lease Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Lease cost:
Operating lease cost	$ 348	$ 568
Variable lease cost	115	103
Total	463	671
Operating cash flow impacts:
Cash paid for amounts included in measurement of lease liabilities	$ 753	$ 766
Weighted average remaining lease term - operating leases (in years)	3 years 4 months 24 days	3 years 8 months 12 days
Weighted average discount rate - operating leases	10.40%	9.20%

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Commitments and Contingencies - Summary of Future Maturities of Lease Liabilities under Noncancelable Operating Leases (Details) $ in Thousands	Mar. 31, 2024 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2024 (remaining 9 months)	$ 2,259
2025	1,177
2026	811
2027	525
2028	481
Thereafter	655
Total payments	5,908
Less interest	(1,010)
Total present value of lease payments	$ 4,898
Operating Lease, Liability, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilities

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Commitments and Contingencies - Summary of Non-Cancellable Purchase Commitments (Details) $ in Thousands	Mar. 31, 2024 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2024 (remaining 9 months)	$ 7,656
2025	38
2026	1,593
Non cancellable purchase commitments	$ 9,287

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Restructuring - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	$ 0	$ 488
Restructuring and related cost, description	There were no restructuring expenses recorded during the three months ended March 31, 2024. All amounts related to the April 2022 and the August 2022 Restructuring were fully paid in 2023.
April 2022 Restructuring
Restructuring Cost and Reserve [Line Items]
Restructuring committed date	Apr. 27, 2022

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Restructuring - Summary of Classification of Restructuring Expense, Including Related Impairment of Right-of-use Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Restructuring Cost and Reserve [Line Items]
Total restructuring expense	$ 0	$ 488
Cost of Revenue
Restructuring Cost and Reserve [Line Items]
Total restructuring expense		56
Impairment of long-lived and intangible assets
Restructuring Cost and Reserve [Line Items]
Total restructuring expense		$ 432

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Warrants - Summary of Warrants Activity (Details) - Common Stock Warrants	3 Months Ended
	Mar. 31, 2024 $ / shares shares
Class of Warrant or Right [Line Items]
Number of shares, beginning balance | shares	3,193,710
Number of shares, warrants issued | shares	79,146
Number of shares, ending balance | shares	3,272,856
Weighted average exercise price, beginning balance | $ / shares	$ 8.36
Weighted average exercise price, warrants issued | $ / shares	0.96
Weighted average exercise price, ending balance | $ / shares	$ 8.18

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Warrants - Additional Information (Details) - $ / shares	Mar. 31, 2024	Dec. 31, 2023	Mar. 31, 2023
Pre-Funded Warrants
Class of Warrant or Right [Line Items]
Warrants to purchase share of common stock	226,298		226,298
SLR Investment Corp ("SLR") | SLR Term A Loan Facility
Class of Warrant or Right [Line Items]
Warrants to purchase share of common stock	79,146
Warrants exercise price	$ 0.96
Warrants and Rights Outstanding, Maturity Date	Jan. 02, 2034
Common Stock Warrants
Class of Warrant or Right [Line Items]
Warrants exercise price	$ 8.18	$ 8.36
Common Stock Warrants | Periods ranging from June 10, 2024 through February 10, 2053 | Maximum
Class of Warrant or Right [Line Items]
Warrants exercise price	$ 112
Warrants and Rights Outstanding, Maturity Date	Jan. 02, 2034
Common Stock Warrants | Periods ranging from June 10, 2024 through February 10, 2053 | Minimum
Class of Warrant or Right [Line Items]
Warrants exercise price	$ 0.008
Warrants and Rights Outstanding, Maturity Date	Jun. 10, 2024

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Revenue - Net Revenue Disaggregated into Categories (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 19,134	$ 17,731
US
Disaggregation Of Revenue [Line Items]
Total net revenue	15,084	13,014
International
Disaggregation Of Revenue [Line Items]
Total net revenue	4,050	4,717
Capital Equipment Product Revenue
Disaggregation Of Revenue [Line Items]
Total net revenue	2,853	3,308
Capital Equipment Product Revenue | US
Disaggregation Of Revenue [Line Items]
Total net revenue	2,236	2,498
Capital Equipment Product Revenue | International
Disaggregation Of Revenue [Line Items]
Total net revenue	617	810
Disposable Product Revenue
Disaggregation Of Revenue [Line Items]
Total net revenue	14,096	12,417
Disposable Product Revenue | US
Disaggregation Of Revenue [Line Items]
Total net revenue	11,221	9,348
Disposable Product Revenue | International
Disaggregation Of Revenue [Line Items]
Total net revenue	2,875	3,069
Product Revenue
Disaggregation Of Revenue [Line Items]
Total net revenue	16,949	15,725
Product Revenue | US
Disaggregation Of Revenue [Line Items]
Total net revenue	13,457	11,846
Product Revenue | International
Disaggregation Of Revenue [Line Items]
Total net revenue	3,492	3,879
Lease Revenue, Capital Equipment
Disaggregation Of Revenue [Line Items]
Total net revenue	211	130
Lease Revenue, Capital Equipment | US
Disaggregation Of Revenue [Line Items]
Total net revenue	128	38
Lease Revenue, Capital Equipment | International
Disaggregation Of Revenue [Line Items]
Total net revenue	83	92
Lease Revenue, Other
Disaggregation Of Revenue [Line Items]
Total net revenue	483	463
Lease Revenue, Other | US
Disaggregation Of Revenue [Line Items]
Total net revenue	387	355
Lease Revenue, Other | International
Disaggregation Of Revenue [Line Items]
Total net revenue	96	108
Service, Other
Disaggregation Of Revenue [Line Items]
Total net revenue	1,491	1,413
Service, Other | US
Disaggregation Of Revenue [Line Items]
Total net revenue	1,112	775
Service, Other | International
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 379	$ 638

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Revenue - Additional Information (Details)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Minimum
Disaggregation of Revenue [Line Items]
Percentage of revenue from contract with customer excluding assessed tax	10.00%	10.00%

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Revenue - Schedule of Changes in Contract Liabilities (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2024 USD ($)
Deferred Revenue
Balance at December 31, 2023	$ 1,041
Additions	464
Subtractions	(353)
Balance at March 31, 2024	1,152
Contract Liabilities
Balance at December 31, 2023	196
Additions	209
Subtractions	(196)
Balance at March 31, 2024	$ 209

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Stock-Based Compensation - Summary of Allocated Stock Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated stock based compensation expense	$ 1,834	$ 2,820
Cost of Revenue
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated stock based compensation expense	45	47
Research and Development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated stock based compensation expense	508	596
Sales and Marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated stock based compensation expense	762	1,114
General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Allocated stock based compensation expense	$ 519	$ 1,063

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Stock-Based Compensation - Additional Information (Details)			1 Months Ended	3 Months Ended
	Feb. 27, 2024 USD ($) $ / shares shares	Aug. 18, 2023	Nov. 30, 2018 USD ($) shares	Mar. 31, 2024 USD ($) shares	Mar. 31, 2023 USD ($) $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options/units, granted					106,071
Exercise price range, lower range limit | $ / shares					$ 9.68
Exercise price range, upper range limit | $ / shares					21.60
Weighted average exercise price | $ / shares					21.20
Weighted average grant date fair value | $ / shares					$ 17.44
Performance stock units percentage of a targeted number of shares, minimum				0.00%
Performance stock units percentage of a targeted number of shares, maximum				200.00%
Allocated stock based compensation expense | $				$ 1,834,000	$ 2,820,000
2018 Equity Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options/units, granted				0
Common stock reserved for issuance				154,352
Exercise price | $ / shares	$ 0.915
Number of shares of common stock	410,000
Reverse stock split ratio		8
Allocated stock based compensation expense | $	$ 100,000
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for issuance				157,829
Maximum percentage to purchase shares of eligible compensation a participant receives during each offering period			10.00%
Maximum amount of shares a participant can accrue at discounted rate of the fair market value. | $			$ 25,000
Maximum number of shares per participant			625
Purchase price as a percentage of its market price on first trading day of each offering period			85.00%

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Stock-Based Compensation - Schedule of Weighted Average Assumptions Used in Black-Scholes Options Pricing Model (Details)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Expected dividend yield	0.00%	0.00%
Risk free interest rate		3.90%
Expected stock price volatility		103.80%
Expected term (years)		6 years 1 month 6 days

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Stock-Based Compensation - Summary of Restricted Stock Units, Restricted Stock Awards and Performance Stock Units (Details)	3 Months Ended
	Mar. 31, 2024 $ / shares shares
Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares, Unvested, Beginning balance | shares	682,832
Shares, Granted | shares	54,337
Shares, Vested | shares	(48,631)
Shares, Canceled | shares	(219)
Shares, Unvested Ending balance | shares	688,319
Weighted Average Grant Date Fair Value, Unvested, Beginning balance | $ / shares	$ 12.43
Weighted Average Grant Date Fair Value, Granted | $ / shares	0.99
Weighted Average Grant Date Fair Value, Vested | $ / shares	68.67
Weighted Average Grant Date Fair Value, Canceled | $ / shares	2.38
Weighted Average Grant Date Fair Value, Unvested Ending balance | $ / shares	$ 7.56
Performance Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares, Unvested, Beginning balance | shares	20,491
Shares, Vested | shares	(573)
Shares, Unvested Ending balance | shares	19,918
Weighted Average Grant Date Fair Value, Unvested, Beginning balance | $ / shares	$ 161.53
Weighted Average Grant Date Fair Value, Vested | $ / shares	15.84
Weighted Average Grant Date Fair Value, Unvested Ending balance | $ / shares	$ 165.68

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Stock-Based Compensation - Schedule of Fair Value of ESPP Used in Black-Scholes Options Pricing Model (Details)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected dividend yield	0.00%	0.00%
Risk free interest rate		3.90%
Expected stock price volatility		103.80%
Expected term (years)		6 years 1 month 6 days
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected dividend yield	0.00%
Risk free interest rate	5.20%
Expected stock price volatility	117.60%
Expected term (years)	6 months

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Net Loss Per Share - Additional Information (Details) - shares	Mar. 31, 2024	Mar. 31, 2023
Pre-Funded Warrants
Warrants to purchase share of common stock	226,298	226,298

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Net Loss Per Share - Schedule of Computation of Diluted Net Loss Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,180,968	3,460,593
Warrants to Purchase Common Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,046,558	2,767,205
Employee Stock Option
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	410,548	485,379
Unvested restricted stock units and performance stock units
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	708,237	181,038
Employee Stock Purchase Plan Shares
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	15,625	26,971

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Related Party Transactions - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Related Party Transaction [Line Items]
Revenues	$ 19,134	$ 17,731
Board of Directors
Related Party Transaction [Line Items]
Revenues	200	$ 1,100
Outstanding due	$ 200		$ 300