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 September 30, 2021

OR

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

For the transition period from _______ to _______

Commission file number: 001-38740

Vapotherm, Inc.

(Exact name of registrant as specified in its charter)

Delaware	46-2259298
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 Domain Drive
Exeter, N.H. (Address of principal executive offices)	03833 (Zip Code)

(603) 658-0011

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	VAPO	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐   No ☒

As of October 27, 2021, there were 26,072,567 outstanding common shares of Vapotherm, Inc.

Vapotherm, Inc.

Form 10-Q

For the Quarterly Period Ended September 30, 2021

TABLE OF CONTENTS

		Page No.
Note Regarding Forward-Looking Statements		3
PART I. FINANCIAL INFORMATION
Item 1	Condensed Consolidated Financial Statements (interim periods unaudited)	5
	Condensed Consolidated Balance Sheets – September 30, 2021 and December 31, 2020	5
	Condensed Consolidated Statements of Comprehensive Loss – Three and Nine Months ended September 30, 2021 and 2020	6
	Condensed Consolidated Statements of Stockholders’ Equity – Three and Nine Months ended September 30, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows – Nine Months ended September 30, 2021 and 2020	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1	Legal Proceedings	38
Item 1A	Risk Factors	38
Item 6	Exhibits	39
Exhibit Index		39
Signatures		40

__________________

We use “Vapotherm,” “Vapotherm Access,” “High Velocity Therapy,” “HVT,” “Precision Flow,” “Hi-VNI,” “OAM,” “HGE,” “Solus Medical,” 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 filed with the Securities and Exchange Commission (“SEC”) on February 24, 2021 and in our Quarterly Reports of Form 10-Q, including this Quarterly Report for the quarter ended September 30, 2021.

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

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, 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 Precision Flow systems, future results of operations, financial position, capital requirements and our needs for additional financing;

• commercial success and market acceptance of our Precision Flow systems, our Oxygen Assist Module, our Vapotherm Access (formerly known as HGE Digital Health) applications and offerings, and any future products we may seek to commercialize;

• competitive companies and technologies in our industry and our ability to compete successfully;

• our ability to enhance our High Velocity Therapy technology, our Oxygen Assist Module, and our Vapotherm Access applications and offerings to expand our indications and to develop and commercialize additional products and services;

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

• the impact of the current COVID-19 pandemic 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 the ongoing COVID-19 pandemic and current global supply chain disruptions;

• our ability to expand, manage and maintain our direct sales and marketing organizations in the United States, Germany and United Kingdom, and to market and sell our Precision Flow systems globally and to expand our limited release and eventually to market and sell our Oxygen Assist Module throughout the United Kingdom, Europe, and the Middle East;

• our ability to hire and retain our senior management and other highly qualified personnel;

• our ability to obtain additional financing in the future;

• our ability to commercialize or obtain regulatory approvals for our products, or the effect of delays in commercializing or obtaining regulatory approvals;

• U.S. Food and Drug Administration 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;

• the timing or likelihood of regulatory filings and approvals;

• our ability to establish, maintain, and use our intellectual property to protect our High Velocity Therapy technology, Precision Flow systems, Oxygen Assist Module, and Vapotherm Access applications and offerings or avoid claims of infringement;

• the volatility of the trading price of our common stock; and

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

3

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 filed with the SEC on February 24, 2021 and in our other filings with the SEC, including this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. Any forward-looking statements made herein speak only as of the date of this Quarterly Report on Form 10-Q, and you should not rely on forward-looking statements as predictions of future events. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

4

PART I. FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS

VAPOTHERM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	September 30, 2021			December 31, 2020
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	70,335		$	113,683
Accounts receivable, net		20,812			23,488
Inventories		24,730			19,873
Prepaid expenses and other current assets		5,924			5,041
Total current assets		121,801			162,085
Property and equipment, net		21,727			20,573
Operating lease right-of-use assets		6,956			8,260
Restricted cash		253			1,853
Goodwill		13,996			16,226
Intangible assets, net		4,877			5,694
Other long-term assets		1,201			967
Total assets	$	170,811		$	215,658
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	4,143		$	4,967
Contract liabilities		2,190			2,977
Accrued expenses and other current liabilities		28,830			34,033
Total current liabilities		35,163			41,977
Long-term loans payable, net		39,707			39,653
Revolving loan facility		1,726			4,888
Deferred income tax liabilities		8			6
Other long-term liabilities		11,978			15,229
Total liabilities		88,582			101,753
Commitments and contingencies (Note 9)
Stockholders' equity
Preferred stock ($0.001 par value) 25,000,000 shares authorized; no shares issued    and outstanding as of September 30, 2021 and December 31, 2020		-			-
Common stock ($0.001 par value) 175,000,000 shares authorized as of    September 30, 2021 and December 31, 2020, 26,043,578 and 25,722,984    shares issued and outstanding as of September 30, 2021 and    December 31, 2020, respectively		26			26
Additional paid-in capital		440,367			430,781
Accumulated other comprehensive income		19			41
Accumulated deficit		(358,183	)		(316,943	)
Total stockholders' equity		82,229			113,905
Total liabilities and stockholders’ equity	$	170,811		$	215,658

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 September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net revenue	$	38,115		$	30,559		$	91,048		$	84,826
Cost of revenue		19,291			15,049			45,649			42,491
Gross profit		18,824			15,510			45,399			42,335
Operating expenses
Research and development		3,979			4,745			13,466			12,002
Sales and marketing		20,465			15,932			47,169			44,107
General and administrative		7,262			6,047			23,948			16,925
Total operating expenses		31,706			26,724			84,583			73,034
Loss from operations		(12,882	)		(11,214	)		(39,184	)		(30,699	)
Other (expense) income
Foreign currency gain (loss)		(58	)		38			(188	)		37
Interest income		21			42			74			227
Interest expense		(647	)		(1,308	)		(1,960	)		(3,898	)
Other		-			-			18			15
Net loss	$	(13,566	)	$	(12,442	)	$	(41,240	)	$	(34,318	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(40	)		34			(22	)		(41	)
Total other comprehensive income (loss)	$	(40	)	$	34		$	(22	)	$	(41	)
Total comprehensive loss	$	(13,606	)	$	(12,408	)	$	(41,262	)	$	(34,359	)
Net loss per share - basic and diluted	$	(0.52	)	$	(0.49	)	$	(1.59	)	$	(1.48	)
Weighted-average number of shares used in calculating net    loss per share, basic and diluted		25,987,648			25,578,328			25,891,045			23,192,703

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

6

VAPOTHERM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)

					Additional		Accumulated Other
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital		Income			Deficit			Equity
Balance at December 31, 2020		25,722,984	$	26	$	430,781	$	41		$	(316,943	)	$	113,905
Issuance of common stock upon exercise of options		77,892		-		761		-			-			761
Issuance of common stock with restricted stock units and    awards		29,699		-		47		-			-			47
Issuance of common stock for services		3,633		-		110		-			-			110
Stock-based compensation expense		-		-		2,575		-			-			2,575
Foreign currency translation adjustments		-		-		-		11			-			11
Net loss		-		-		-		-			(10,407	)		(10,407	)
Balance at March 31, 2021		25,834,208	$	26	$	434,274	$	52		$	(327,350	)	$	107,002
Issuance of common stock upon exercise of options		14,577		-		156		-			-			156
Issuance of common stock with restricted stock units and    awards		51,617		-		44		-			-			44
Issuance of common stock under the Employee Stock    Purchase Plan		55,558		-		851		-			-			851
Issuance of common stock for services		545		-		13		-			-			13
Stock-based compensation expense		-		-		2,420		-			-			2,420
Foreign currency translation adjustments		-		-		-		7			-			7
Net loss		-		-		-		-			(17,267	)		(17,267	)
Balance at June 30, 2021		25,956,505	$	26	$	437,758	$	59		$	(344,617	)	$	93,226
Issuance of common stock upon exercise of options		61,594		-		488		-			-			488
Issuance of common stock with restricted stock units and    awards		24,934		-		42		-			-			42
Issuance of common stock for services		545		-		13		-			-			13
Stock-based compensation expense		-		-		2,066		-			-			2,066
Foreign currency translation adjustments		-		-		-		(40	)		-			(40	)
Net loss		-		-		-		-			(13,566	)		(13,566	)
Balance at September 30, 2021		26,043,578	$	26	$	440,367	$	19		$	(358,183	)	$	82,229

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

7

VAPOTHERM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share amounts)

					Additional		Accumulated Other
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balance at December 31, 2019		20,851,531	$	21	$	319,115	$	44		$	(265,441	)	$	53,739
Issuance of common stock upon exercise of options		24,687		-		40		-			-			40
Issuance of common stock with restricted stock units and    awards		34,265		-		58		-			-			58
Issuance of common stock for services		6,666		-		77		-			-			77
Stock-based compensation expense		-		-		1,370		-			-			1,370
Foreign currency translation adjustment		-		-		-		(71	)		-			(71	)
Net loss		-		-		-		-			(13,844	)		(13,844	)
Balance at March 31, 2020		20,917,149	$	21	$	320,660	$	(27	)	$	(279,285	)	$	41,369
Issuance of common stock in connection with public    offering, net		3,852,500		4		93,823		-			-			93,827
Issuance of common stock in connection with    at-the-market offering, net		511,648		1		9,783		-			-			9,784
Issuance of common stock under Employee Stock    Purchase Plan		36,389		-		359		-			-			359
Issuance of common stock upon exercise of options		99,206		-		227		-			-			227
Issuance of common stock upon exercise of warrants		41,066		-		-		-			-			-
Issuance of common stock with restricted stock units and    awards		31,114		-		53		-			-			53
Issuance of common stock for services		3,986		-		72		-			-			72
Stock-based compensation expense		-		-		1,305		-			-			1,305
Foreign currency translation adjustment		-