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, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 001-38740
Vapotherm, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
46-2259298 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
100 Domain Drive |
|
Exeter, (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 November 2, 2023, there were 6,138,333 outstanding shares of common stock of Vapotherm, Inc.
VAPOTHERM, INC.
FORM 10-Q
For the Quarterly Period Ended September 30, 2023
TABLE OF CONTENTS
|
|
Page No. |
3 |
||
|
||
Item 1 |
5 |
|
|
Condensed Consolidated Balance Sheets – September 30, 2023 and December 31, 2022 |
5 |
|
6 |
|
|
Condensed Consolidated Statements of Stockholders’ Deficit – Three and Nine Months ended September 30, 2023 and 2022 |
7 |
|
Condensed Consolidated Statements of Cash Flows – Nine Months ended September 30, 2023 and 2022 |
9 |
|
10 |
|
Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
32 |
Item 3 |
44 |
|
Item 4 |
45 |
|
|
|
|
Item 1 |
46 |
|
Item 1A |
46 |
|
Item 2 |
48 |
|
Item 6 |
49 |
|
49 |
||
50 |
||
__________________
We use “Vapotherm,” “High Velocity Therapy,” “HVT,” “HVT 2.0,” “Precision Flow,” “Hi-VNI,” “OAM,” “Vapotherm UK,” “Vapotherm Access,” and other marks as trademarks in the United States and/or in other countries. This Quarterly Report on Form 10-Q contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.
Unless otherwise indicated, information contained in this Quarterly Report on Form 10-Q concerning our industry and the markets in which we operate, including our general expectations, market position and market opportunity, is based on our management’s estimates and research, as well as industry and general publications and research, surveys and studies conducted by third parties. We believe that the information from these third-party publications, research, surveys and studies included in this Quarterly Report on Form 10-Q is reliable. Management’s estimates are derived from publicly available information, their knowledge of our industry and their assumptions based on such information and knowledge, which we believe to be reasonable. This data involves a number of assumptions and limitations which are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023 and in our other subsequent filings with the SEC, including this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023.
Unless the context requires otherwise, references to “Vapotherm,” the “Company,” “we,” “us,” and “our,” refer to Vapotherm, Inc. and our consolidated subsidiaries.
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “would,” “could,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” and the negative of these terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words and the use of future dates. Forward-looking statements include, but are not limited to, statements concerning:
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 for the year ended December 31, 2022 as filed with the SEC on February 23, 2023 and in our other subsequent filings with the SEC, including this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. Any forward-looking statements made herein speak only as of the date of this Quarterly Report on Form 10-Q, and you should not rely on forward-looking statements as predictions of future events. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VAPOTHERM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
14,418 |
|
|
$ |
15,738 |
|
Accounts receivable, net of expected credit losses |
|
|
7,441 |
|
|
|
9,102 |
|
Inventories, net |
|
|
23,093 |
|
|
|
32,980 |
|
Prepaid expenses and other current assets |
|
|
4,202 |
|
|
|
2,081 |
|
Total current assets |
|
|
49,154 |
|
|
|
59,901 |
|
Property and equipment, net |
|
|
23,908 |
|
|
|
26,636 |
|
Operating lease right-of-use assets |
|
|
3,556 |
|
|
|
5,805 |
|
Restricted cash |
|
|
1,109 |
|
|
|
1,109 |
|
Goodwill |
|
|
541 |
|
|
|
536 |
|
Deferred income tax assets |
|
|
124 |
|
|
|
96 |
|
Other long-term assets |
|
|
2,212 |
|
|
|
2,112 |
|
Total assets |
|
$ |
80,604 |
|
|
$ |
96,195 |
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
2,951 |
|
|
$ |
2,739 |
|
Contract liabilities |
|
|
1,242 |
|
|
|
1,216 |
|
Accrued expenses and other current liabilities |
|
|
11,996 |
|
|
|
15,609 |
|
Total current liabilities |
|
|
16,189 |
|
|
|
19,564 |
|
Long-term loans payable, net |
|
|
104,425 |
|
|
|
96,994 |
|
Other long-term liabilities |
|
|
7,486 |
|
|
|
7,827 |
|
Total liabilities |
|
|
128,100 |
|
|
|
124,385 |
|
(Note 9) |
|
|
|
|
|
|
||
Stockholders’ deficit |
|
|
|
|
|
|
||
Preferred stock ($0.001 par value) 25,000,000 shares authorized; no shares |
|
|
|
|
|
|
||
Common stock ($0.001 par value) 21,875,000 shares authorized as of |
|
|
6 |
|
|
|
4 |
|
Additional paid-in capital |
|
|
490,697 |
|
|
|
461,965 |
|
Accumulated other comprehensive loss |
|
|
(189 |
) |
|
|
(157 |
) |
Accumulated deficit |
|
|
(538,010 |
) |
|
|
(490,002 |
) |
Total stockholders’ deficit |
|
|
(47,496 |
) |
|
|
(28,190 |
) |
Total liabilities and stockholders’ deficit |
|
$ |
80,604 |
|
|
$ |
96,195 |
|
(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.
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, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net revenue |
|
$ |
15,167 |
|
|
$ |
13,545 |
|
|
$ |
48,935 |
|
|
$ |
48,138 |
|
Cost of revenue |
|
|
9,154 |
|
|
|
11,682 |
|
|
|
29,850 |
|
|
|
36,018 |
|
Gross profit |
|
|
6,013 |
|
|
|
1,863 |
|
|
|
19,085 |
|
|
|
12,120 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
3,132 |
|
|
|
4,382 |
|
|
|
10,842 |
|
|
|
16,241 |
|
Sales and marketing |
|
|
7,967 |
|
|
|
11,460 |
|
|
|
25,835 |
|
|
|
36,615 |
|
General and administrative |
|
|
4,430 |
|
|
|
6,477 |
|
|
|
15,219 |
|
|
|
20,754 |
|
Impairment of goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,701 |
|
Impairment of long-lived and intangible assets |
|
|
755 |
|
|
|
2,139 |
|
|
|
1,187 |
|
|
|
6,175 |
|
Loss on disposal of property and equipment |
|
|
- |
|
|
|
321 |
|
|
|
53 |
|
|
|
321 |
|
Total operating expenses |
|
|
16,284 |
|
|
|
24,779 |
|
|
|
53,136 |
|
|
|
94,807 |
|
Loss from operations |
|
|
(10,271 |
) |
|
|
(22,916 |
) |
|
|
(34,051 |
) |
|
|
(82,687 |
) |
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(4,828 |
) |
|
|
(3,276 |
) |
|
|
(13,801 |
) |
|
|
(7,872 |
) |
Interest income |
|
|
16 |
|
|
|
56 |
|
|
|
70 |
|
|
|
113 |
|
Foreign currency loss |
|
|
(29 |
) |
|
|
(73 |
) |
|
|
(174 |
) |
|
|
(188 |
) |
Loss on extinguishment of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,114 |
) |
Net loss before income taxes |
|
$ |
(15,112 |
) |
|
$ |
(26,209 |
) |
|
$ |
(47,956 |
) |
|
$ |
(91,748 |
) |
Provision (benefit) for income taxes |
|
|
18 |
|
|
|
(8 |
) |
|
|
52 |
|
|
|
74 |
|
Net loss |
|
$ |
(15,130 |
) |
|
$ |
(26,201 |
) |
|
$ |
(48,008 |
) |
|
$ |
(91,822 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
|
(145 |
) |
|
|
(172 |
) |
|
|
(32 |
) |
|
|
(412 |
) |
Total other comprehensive loss |
|
$ |
(145 |
) |
|
$ |
(172 |
) |
|
$ |
(32 |
) |
|
$ |
(412 |
) |
Total comprehensive loss |
|
$ |
(15,275 |
) |
|
$ |
(26,373 |
) |
|
$ |
(48,040 |
) |
|
$ |
(92,234 |
) |
Net loss per share - basic and diluted |
|
$ |
(2.38 |
) |
|
$ |
(7.85 |
) |
|
$ |
(8.10 |
) |
|
$ |
(27.69 |
) |
Weighted-average number of shares used in calculating net |
|
|
6,361,098 |
|
|
|
3,337,072 |
|
|
|
5,926,506 |
|
|
|
3,316,471 |
|
(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.
6
VAPOTHERM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
(In thousands, except share amounts)
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
|
|
|
|
|
|||||||||
|
|
Common Stock |
|
|
Paid-in |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Stockholders' |
|
|||||||||
|
|
Shares (1) |
|
|
Amount |
|
|
Capital |
|
|
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 |
|
|
2,187,781 |
|
|
|
2 |
|
|
|
20,941 |
|
|
|
- |
|
|
|
- |
|
|
|
20,943 |
|
Issuance of common stock upon exercise of options |
|
|
28 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of common stock upon settlement of |
|
|
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 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon exercise of pre-funded |
|
|
324,015 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of common stock upon settlement of |
|
|
1,481 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of common stock under the Employee Stock |
|
|
25,512 |
|
|
|
- |
|
|
|
77 |
|
|
|
- |
|
|
|
- |
|
|
|
77 |
|
Issuance of common stock for services |
|
|
2,938 |
|
|
|
- |
|
|
|
58 |
|
|
|
- |
|
|
|
- |
|
|
|
58 |
|
Issuance of common stock warrants |
|
|
- |
|
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
- |
|
|
|
43 |
|
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
2,527 |
|
|
|
- |
|
|
|
- |
|
|
|
2,527 |
|
Foreign currency translation adjustments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(22 |
) |
|
|
- |
|
|
|
(22 |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(14,788 |
) |
|
|
(14,788 |
) |
Balance at June 30, 2023 |
|
|
6,130,938 |
|
|
$ |
6 |
|
|
$ |
488,459 |
|
|
$ |
(44 |
) |
|
$ |
(522,880 |
) |
|
$ |
(34,459 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon settlement of |
|
|
4,218 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance of common stock for services |
|
|
2,938 |
|
|
|
- |
|
|
|
58 |
|
|
|
- |
|
|
|
- |
|
|
|
58 |
|
Issuance of common stock warrants |
|
|
- |
|
|
|
- |
|
|
|
40 |
|
|
|
- |
|
|
|
- |
|
|
|
40 |
|
Retirement of common shares upon reverse stock split |
|
|
(121 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
2,140 |
|
|
|
- |
|
|
|
- |
|
|
|
2,140 |
|
Foreign currency translation adjustments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(145 |
) |
|
|
- |
|
|
|
(145 |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(15,130 |
) |
|
|
(15,130 |
) |
Balance at September 30, 2023 |
|
|
6,137,973 |
|
|
$ |
6 |
|
|
$ |
490,697 |
|
|
$ |
(189 |
) |
|
$ |
(538,010 |
) |
|
$ |
(47,496 |
) |
(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.
7
VAPOTHERM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(In thousands, except share amounts)
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
|
|
|
Stockholders' |
|
|||||||||
|
|
Common Stock |
|
|
Paid-in |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Equity |
|
|||||||||
|
|
Shares (1) |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Deficit |
|
|
(Deficit) |
|
||||||
Balance at December 31, 2021 |
|
|
3,265,782 |
|
|
$ |
3 |
|
|
$ |
443,381 |
|
|
$ |
26 |
|
|
$ |
(376,743 |
) |
|
$ |
66,667 |
|
Issuance of common stock upon exercise of options |
|
|
153 |
|
|
|
- |
|
|
|
12 |
|
|
|
- |
|
|
|
- |
|
|
|
12 |
|
Issuance of common stock upon settlement of |
|
|
7,561 |
|
|
|
- |
|
|
|
10 |
|
|
|
- |
|
|
|
- |
|
|
|
10 |
|
Issuance of common stock for services |
|
|
460 |
|
|
|
- |
|
|
|
76 |
|
|
|
- |
|
|
|
- |
|
|
|
76 |
|
Issuance of common stock to satisfy contingent |
|
|
46,021 |
|
|
|
- |
|
|
|
5,630 |
|
|
|
- |
|
|
|
- |
|
|
|
5,630 |
|
Issuance of common stock warrants |
|
|
- |
|
|
|
- |
|
|
|
1,157 |
|
|
|
- |
|
|
|
- |
|
|
|
1,157 |
|
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
3,370 |
|
|
|
- |
|
|
|
- |
|
|
|
3,370 |
|
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(55 |
) |
|
|
- |
|
|
|
(55 |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(22,938 |
) |
|
|
(22,938 |
) |
Balance at March 31, 2022 |
|
|
3,319,977 |
|
|
$ |
3 |
|
|
$ |
453,636 |
|
|
$ |
(29 |
) |
|
$ |
(399,681 |
) |
|
$ |
53,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon exercise of options |
|
|
2,047 |
|
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
- |
|
|
|
43 |
|
Issuance of common stock upon settlement of |
|
|
6,152 |
|
|
|
- |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
Issuance of common stock under the Employee Stock |
|
|
7,871 |
|
|
|
- |
|
|
|
135 |
|
|
|
- |
|
|
|
- |
|
|
|
135 |
|
Issuance of common stock for services |
|
|
561 |
|
|
|
- |
|
|
|
88 |
|
|
|
- |
|
|
|
- |
|
|
|
88 |
|
Stock-based compensation expense |
|
|
- |
|
|
|
- |
|
|
|
2,410 |
|
|
|
- |
|
|
|
- |
|
|
|
2,410 |
|
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(185 |
) |
|
|
- |
|
|
|
(185 |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(42,683 |
) |
|
|
(42,683 |
) |
Balance at June 30, 2022 |
|
|
3,336,608 |
|
|
$ |
3 |
|
|
$ |
456,314 |
|
|
$ |
(214 |
) |
|
$ |
(442,364 |
) |
|
$ |
13,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon exercise of options |
|
|
748 |
|
|
- |
|
|
|
10 |
|
|
- |
|
|
|
- |
|
|
|
10 |
|
||
Issuance of common stock upon settlement of |
|
|
478 |
|
|
- |
|
|
|
3 |
|
|
- |
|
|
|
- |
|
|
|
3 |
|
||
Issuance of common stock for services |
|
|
43 |
|
|
- |
|
|
|
67 |
|
|
- |
|
|
|
- |
|
|
|
67 |
|
||
Modification of common stock warrants |
|
|
- |
|
|
|
- |
|
|
|
39 |
|
|
|
- |
|
|
|
- |
|
|
|
39 |
|
Stock-based compensation expense |
|
|
- |
|
|
- |
|
|
|
1,614 |
|
|
|
- |
|
|
|
- |
|
|
|
1,614 |
|
|
Foreign currency translation adjustments |
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(172 |
) |
|
|
- |
|
|
|
(172 |
) |
|
Net loss |
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(26,201 |
) |
|
|
(26,201 |
) |
|||
Balance at September 30, 2022 |
|
|
3,337,877 |
|
|
$ |
3 |
|
|
$ |
458,047 |
|
|
$ |
(386 |
) |
|
$ |
(468,565 |
) |
|
$ |
(10,901 |
) |
(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.
8
VAPOTHERM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
(48,008 |
) |
|
$ |
(91,822 |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
7,603 |
|
|
|
7,625 |
|
Depreciation and amortization |
|
|
3,687 |
|
|
|
4,006 |
|
Provision for credit losses |
|
|
(16 |
) |
|
|
346 |
|
Provision for inventory valuation |
|
|
760 |
|
|
|
2,655 |
|
Non-cash lease expense |
|
|
1,107 |
|
|
|
1,670 |
|
Change in fair value of contingent consideration |
|
|
- |
|
|
|
(3,351 |
) |
Impairment of goodwill |
|
|
- |
|
|
|
14,701 |
|
Impairment of long-lived and intangible assets |
|
|
1,187 |
|
|
|
6,175 |
|
Loss on disposal of property and equipment |
|
|
53 |
|
|
|
321 |
|
Placed units reserve |
|
|
588 |
|
|
|
225 |
|
Interest paid in-kind |
|
|
6,992 |
|
|
|
- |
|
Amortization of discount on debt |
|
|
552 |
|
|
|
502 |
|
Deferred income taxes |
|
|
52 |
|
|
|
74 |
|
Loss on extinguishment of debt |
|
|
- |
|
|
|
1,114 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
1,684 |
|
|
|
2,338 |
|
Inventories |
|
|
9,182 |
|
|
|
(2,651 |
) |
Prepaid expenses and other assets |
|
|
(2,108 |
) |
|
|
(1,902 |
) |
Accounts payable |
|
|
243 |
|
|
|
(4,295 |
) |
Contract liabilities |
|
|
26 |
|
|
|
(562 |
) |
Accrued expenses and other current liabilities |
|
|
(2,047 |
) |
|
|
(4,853 |
) |
Operating lease liabilities, current and long-term |
|
|
(1,884 |
) |
|
|
(1,581 |
) |
Net cash used in operating activities |
|
|
(20,347 |
) |
|
|
(69,265 |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
(1,962 |
) |
|
|
(8,266 |
) |
Net cash used in investing activities |
|
|
(1,962 |
) |
|
|
(8,266 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds from issuance of common stock and pre-funded warrants and |
|
|
20,943 |
|
|
|
- |
|
Proceeds from loans, net of discount |
|
|
- |
|
|
|
99,094 |
|
Repayment of loans |
|
|
- |
|
|
|
(40,000 |
) |
Payments of debt extinguishment costs |
|
|
- |
|
|
|
(817 |
) |
Payment of debt issuance costs |
|
|
- |
|
|
|
(1,567 |
) |
Repayments on revolving loan facility |
|
|
- |
|
|
|
(6,608 |
) |
Payment of contingent consideration |
|
|
- |
|
|
|
(135 |
) |
Proceeds from exercise of stock options |
|
|
- |
|
|
|
65 |
|
Proceeds from exercise of warrants |
|
|
3 |
|
|
|
- |
|
Proceeds from issuance of common stock under Employee Stock Purchase Plan |
|
|
77 |
|
|
|
135 |
|
Net cash provided by financing activities |
|
|
21,023 |
|
|
|
50,167 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
(34 |
) |
|
|
(142 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
|
(1,320 |
) |
|
|
(27,506 |
) |
Cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Beginning of period |
|
|
16,847 |
|
|
|
57,324 |
|
End of period |
|
$ |
15,527 |
|
|
$ |
29,818 |
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
||
Interest paid during the period |
|
$ |
4,268 |
|
|
$ |
6,023 |
|
Property and equipment purchases in accounts payable and accrued expenses |
|
$ |
512 |
|
|
$ |
617 |
|
Issuance of common stock to satisfy contingent consideration |
|
$ |
- |
|
|
$ |
5,630 |
|
Issuance of common stock warrants in conjunction with long term debt |
|
$ |
111 |
|
|
$ |
1,196 |
|
Issuance of common stock upon settlement of restricted stock units |
|
$ |
- |
|
|
$ |
15 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
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 Company’s 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 Company is using the underlying technology to develop digital capabilities for the Company’s devices. 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 510k clearance from the 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, the United Kingdom, Germany, Belgium and Spain and through distributors in other select countries outside of those countries. 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 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.
In the fourth quarter of 2022, in conjunction with the Company’s path to profitability and annual operating planning efforts, the Company completed its exit of the Vapotherm Access call center business, which included Vapotherm Access, formerly “HGE Healthcare Solutions, LLC” or “HGE,” and Pulmonary Care Innovations, PLLC d/b/a RespirCare (“RespirCare”). Effective October 31, 2022, the Company terminated its master service agreement with RespirCare, which resulted in the deconsolidation of RespirCare from the Company’s condensed consolidated financial statements (see Note 10).
Issuance of Securities through a Private Placement
On February 10, 2023 (the “Closing Date”), the Company issued in a private placement (the “February 2023 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 (the “Pre-Funded Warrants”), and, in each case, accompanying warrants to purchase an aggregate of up to 2,738,094 shares of common stock (the “Warrants”) at a purchase
10
price of $8.40 per unit for aggregate gross proceeds to the Company of approximately $23.0 million, before deducting fees to the placement agent and other offering expenses of $2.1 million.
The Warrants expire five years following the Closing Date, have an exercise price of $9.36 per share, and were immediately exercisable upon issuance. The Pre-Funded Warrants expire 30 years following the Closing Date or when exercised in full, have an exercise price of $0.008 per share, and were immediately exercisable upon issuance. The exercise price and number of shares of common stock issuable upon the exercise of the Warrants and the Pre-Funded Warrants will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants and the Pre-Funded Warrants agreements. The Warrants and Pre-Funded Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Warrants and Pre-Funded Warrants do not provide any guarantee of value or return.
Reverse Stock Split
The Company effected a reverse stock split of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at a ratio of 1-for-8 effective as of 12:01 a.m., Eastern Time, on August 18, 2023 (the “Reverse Stock Split”). No fractional shares were issued. All shares and per share amounts in the condensed consolidated financial statements and accompanying notes have been retroactively adjusted to give effect to the Reverse Stock Split.
Following the Reverse Stock Split, the Company’s issued and outstanding shares of Common Stock were decreased from approximately 49,081,000 pre-split shares to 6,135,000 million post-split shares. In connection with the Reverse Stock Split effectiveness, the number of authorized shares of the Company's Common Stock was decreased from 175,000,000 shares to 21,875,000 shares.
11
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 this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Our accounting policies are described in the “Notes to Consolidated Financial Statements” in our 2022 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 our 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 September 30, 2023, the majority of the Company’s long-term assets are located in the United States. Long-term assets located outside the United States totaled $14.3 million, including $9.4 million located in Mexico, at September 30, 2023. Long-term assets located outside the United States totaled $14.9 million, including $9.9 million located in Mexico, at December 31, 2022.
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 doubtful accounts and 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.
Unaudited Interim Financial Information
The accompanying condensed consolidated balance sheet as of September 30, 2023, and the condensed consolidated statements of comprehensive loss and stockholders’ deficit for the three and nine months ended September 30, 2023 and 2022 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022 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 September 30, 2023 and the results of its operations for the three and nine months ended September 30, 2023 and 2022 and the cash flows for the nine months ended September 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2023 and 2022 are also unaudited. The results of operations for the three and nine months ended September 30, 2023 and 2022 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.
12
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
Financial Instruments and Concentrations of Credit Risk
As of September 30, 2023, 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 September 30, 2023, 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 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 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 related to certificates of deposits and collateral in relation to lease agreements. As of September 30, 2023, $1.1 million of the Company’s $15.5 million of cash, cash equivalents and restricted cash balance was located outside the United States. As of December 31, 2022, $1.0 million of the Company’s $16.8 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:
|
|
September 30, |
|
|
December 31, |
|
||
Cash and cash equivalents |
|
$ |
14,418 |
|
|
$ |
15,738 |
|
Restricted cash |
|
|
1,109 |
|
|
|
1,109 |
|
Total cash, cash equivalents, and restricted cash |
|
$ |
15,527 |
|
|
$ |
16,847 |
|
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
13
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 10).
14
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
Goodwill
Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting in a business combination. Goodwill is not amortized but reviewed for impairment. Goodwill is reviewed annually, as of October 1, and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable.
The Company compares the fair value of its reporting units to their carrying values. If the carrying value of the net assets assigned to a reporting unit exceeds the fair value of the reporting unit, the Company would record an impairment loss equal to the difference (see Note 6).
Intangible Assets
Intangible assets are related to customer relationships, developed technology, and customer agreements and are amortized on a straight-line basis over their useful lives. Amortization is recorded within sales and marketing expenses in the condensed consolidated statements of comprehensive loss for customer-related intangible assets while amortization of other intangible assets is included within general and administrative expenses in the condensed consolidated statements of comprehensive loss. Intangible assets are evaluated for impairment whenever events or circumstances indicate an asset may be impaired (see Note 6).
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, 2022 to September 30, 2023 is as follows:
Balance at December 31, 2022 |
|
$ |
281 |
|
Provisions for warranty obligations |
|
|
189 |
|
Settlements |
|
|
(135 |
) |
Balance at September 30, 2023 |
|
$ |
335 |
|
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 of revenue category. During the three and nine months ended September 30, 2022, service revenue also included $0.7 million and $2.7 million, respectively, of fees from the standalone remote patient monitoring services sold through Vapotherm Access.
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
15
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 or nine months ended September 30, 2023 or 2022.
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, Leases (“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 totaled $0.1 million and less than $0.1 million at September 30, 2023 and December 31, 2022, respectively. 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
16
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 sales. 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 each of the three months ended September 30, 2023 and 2022 were $0.3 million. The total costs of shipping and handling for each of the nine months ended September 30, 2023 and 2022 were $0.8 million.
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 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.
17
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
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, and Singapore. The provision for income taxes for the three and nine months ended September 30, 2023 totaled less than $0.1 million and $0.1 million, respectively, and related to income earned by the Company’s foreign subsidiaries after accounting for transfer pricing adjustments. The benefit for income taxes for the three months ended September 30, 2022 totaled less than $0.1 million and related to a benefit for net deferred income tax assets deemed more likely than not to be realized by the Company’s foreign subsidiaries. The provision for income taxes for the nine months ended September 30, 2022 totaled $0.1 million and related to deferred tax liabilities for differences in the book and tax basis of indefinite-lived assets, partially offset by a benefit for net deferred income tax assets deemed more likely than not to be realized by the Company’s foreign subsidiaries.
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, 2022 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
Credit Losses (Topic 326)
In June 2016, the FASB issued ASU No. , Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Subsequent to the issuance of ASU 2016-13, the FASB clarified the guidance through several ASUs. The collective new guidance (ASC 326) generally requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used and establishes additional disclosures related to
18
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
credit risks. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year . The adoption did not have a material impact on the Company’s condensed 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 – 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 September 30, 2023, 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 $4.3 million at September 30, 2023 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 8). Its fair value is deemed to be immaterial at September 30, 2023 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 or nine months ended September 30, 2023.
During the first, second and third quarters of 2023, the Company granted SLR warrants to purchase 13,547 shares, 48,170 shares and 66,990 shares, respectively, of common stock (the “PIK Warrants”). The issuance of the PIK Warrants were made pursuant to amendments to the Company’s financing arrangement (see Note 8). These equity-classified PIK Warrants were valued using the Black-Scholes pricing model, which falls within Level 3 of the fair value hierarchy.
During the first quarter of 2022, the Company granted warrants to purchase 13,421 shares of common stock and during the third quarter of 2022, these warrants were modified to amend the exercise price from $111.76 per share to $13.04 per share. The modification of these warrants resulted in an incremental increase in fair value of the warrants of less than $0.1 million, which the Company recorded as an addition to the debt discount for non-cash consideration paid to its lenders. The issuance and modification of the warrants were made in connection with its financing arrangement (see Note 8). These equity-classified warrants were valued using the Black-Scholes pricing model, which falls within Level 3 of the fair value hierarchy.
The fair value of warrants are estimated on the date of grant using the Black-Scholes pricing model with the following assumptions:
|
|
2023 |
|
2022 |
Expected dividend yield |
|
0.0% |
|
0.0% |
Risk free interest rate |
|
3.9%-4.6% |
|
1.9%-3.9% |
Expected stock price volatility |
|
20.5%-20.9% |
|
79.3%-87.7% |
Expected term (years) |
|
2.5 |
|
9.5-10.0 |
19
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
4. Accounts Receivable
Accounts receivable consists of the following:
|
|
September 30, |
|
|
December 31, |
|
||
United States |
|
$ |
4,652 |
|
|
$ |
6,611 |
|
International |
|
|
2,951 |
|
|
|
2,718 |
|
Total accounts receivable |
|
|
7,603 |
|
|
|
9,329 |
|
Less: Allowance for expected credit losses |
|
|
(162 |
) |
|
|
(227 |
) |
Accounts receivable, net of expected credit losses |
|
$ |
7,441 |
|
|
$ |
9,102 |
|
A roll-forward of the Company’s allowance for credit losses from December 31, 2022 to September 30, 2023 is as follows:
Balance at December 31, 2022 |
|
$ |
227 |
|
Change in provision for credit losses |
|
|
(16 |
) |
Write-offs of uncollectible balances |
|
|
(49 |
) |
Balance at September 30, 2023 |
|
$ |
162 |
|
No individual customer accounted for 10% or more of net revenue for the three or nine months ended September 30, 2023 or 2022. No individual customer accounted for 10% or more of total accounts receivable at September 30, 2023 or December 31, 2022.
5. Inventories
Inventory balances, net of reserves, consist of the following:
|
|
September 30, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
11,192 |
|
|
$ |
15,897 |
|
Finished goods |
|
|
11,074 |
|
|
|
16,215 |
|
Component parts |
|
|
827 |
|
|
|
868 |
|
Total inventories |
|
$ |
23,093 |
|
|
$ |
32,980 |
|
The Company recorded a provision for excess and obsolete inventory of $0.5 million and $1.8 million for the three months ended September 30, 2023 and 2022, respectively. The Company recorded a provision for excess and obsolete inventory of $0.8 million and $2.7 million for the nine months ended September 30, 2023 and 2022, respectively.
6. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill during the nine months ended September 30, 2023 is as follows:
|
|
Goodwill |
|
|
|
Balance at December 31, 2022 |
|
$ |
536 |
|
|
Foreign currency exchange rate changes |
|
|
5 |
|
|
Balance at September 30, 2023 |
|
$ |
541 |
|
|
During the second quarter of 2022, a substantial decline in the Company’s stock price and other factors, including leadership changes in the Vapotherm Access reporting unit, represented indicators of long-lived asset impairment for the Vapotherm Access asset group, which triggered an interim impairment assessment. The Company determined that the carrying value of Vapotherm Access intangible assets was not recoverable based on the excess of the carrying value of the asset group over the undiscounted future cash flows. The decrease in the undiscounted future cash flows from the asset group was primarily attributable to a significant decrease in future forecasted revenues, which reflected the notification of non-renewal of certain HGE customer
20
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
relationships during the second quarter of 2022, as well as uncertainty related to the Company’s ability to scale the Vapotherm Access call center business given slower than expected patient enrollment. As a result, the Company an impairment charge of $4.0 million to write down HGE customer relationships and developed technology to their estimated fair value during the second quarter of 2022. The fair value of the intangible assets was estimated using discounted cash flows under the income approach, which the Company considers to be a Level 3 measurement. There were no impairments of intangible assets during the three months ended September 30, 2022, however, the Company recorded an impairment charge related to the long-lived assets, other than intangible assets, of Vapotherm Access of $2.1 million during the three months ended September 30, 2022 (see Note 10). There were no impairments of intangible assets during the three or nine months ended September 30, 2023.
The factors listed above, along with the long-lived asset impairment, also represented indicators of goodwill impairment which triggered an interim impairment assessment during the second quarter of 2022. Based on the results of the optional qualitative assessment, the Company determined that there were no indicators of impairment for the Vapotherm UK reporting unit, but the fair value of the Vapotherm Access reporting unit was more likely than not less than its carrying value. There is no goodwill allocated to the Vapotherm reporting unit.
To perform the quantitative assessment for the Vapotherm Access reporting unit, the Company determined the fair value using the income approach. The Company utilized a discounted cash flow analysis, which involves estimating the expected after-tax cash flows that will be generated by the reporting unit and then discounting those cash flows to present value, reflecting the relevant risks associated with the reporting unit and the time value of money. This approach requires the use of significant estimates and assumptions, including forecasted revenue growth rates, forecasted earnings before interest, taxes, depreciation and amortization margins, and discount rates. The Company’s forecasts are based on historical experience, expected market demand, and other industry information. The Company determined that the carrying value of the Vapotherm Access reporting unit exceeded the fair value, with the decrease in the fair value being primarily attributable to a significant decrease in future forecasted revenues, as discussed above. As a result, during the second quarter of 2022, the Company recognized an impairment charge of $14.7 million to write down the goodwill of the Vapotherm Access reporting unit to its estimated fair value. There were no impairments of goodwill during the three or nine months ended September 30, 2023.
There was no amortization expense recognized within operating expenses during the three or nine months ended September 30, 2023. The Company recognized $0.1 million and $0.2 million of amortization expense within sales and marketing expenses related to the intangible assets during the three and nine months ended September 30, 2022, respectively. The Company also recognized less than $0.1 million of amortization expense within general and administrative expenses related to intangible assets during each of the three and nine months ended September 30, 2022.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
|
|
September 30, |
|
|
December 31, |
|
||
|
$ |
2,894 |
|
|
$ |
2,313 |
|
|
Accrued bonuses |
|
|
1,541 |
|
|
|
2,981 |
|
Accrued payroll and employee-related costs |
|
|
1,266 |
|
|
|
938 |
|
Accrued taxes |
|
|
858 |
|
|
|
1,322 |
|
Accrued interest |
|
|
802 |
|
|
|
689 |
|
Accrued inventories |
|
|
784 |
|
|
|
310 |
|
Accrued commissions |
|
|
523 |
|
|
|
727 |
|
Accrued vacation liability |
|
|
484 |
|
|
|
601 |
|
Accrued termination benefits |
|
|
471 |
|
|
|
2,474 |
|
Accrued professional fees |
|
|
455 |
|
|
|
621 |
|
Product warranty reserve |
|
|
335 |
|
|
|
281 |
|
Accrued freight |
|
|
234 |
|
|
|
422 |
|
Other |
|
|
1,349 |
|
|
|
1,930 |
|
Total accrued expenses and other current liabilities |
|
$ |
11,996 |
|
|
$ |
15,609 |
|
21
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
8. Debt
Current Credit Facilities
On February 18, 2022 (the “Effective Date”), the Company entered into a Loan and Security Agreement (the “SLR Loan Agreement”) with SLR Investment Corp. (“SLR”) which provided for a term A loan facility of $100.0 million (the “SLR Term A Loan Facility”) and a term B loan facility of $25.0 million (the “SLR Term B Loan Facility”). The SLR Term A Loan Facility was funded to the Company on the Effective Date. In connection with this funding, the Company granted 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 SLR Term B Loan Facility was available to the Company upon achievement of a certain minimum revenue level as more fully described in the SLR Loan Agreement. The proceeds of the SLR Term A Loan Facility were used to repay all indebtedness under the Company’s prior loan agreement with CIBC, as described below.
On August 1, 2022, the Company entered into an Amendment No. 1 to the SLR Loan Agreement (the “First Amendment,” together with the SLR Loan Agreement, as amended, the “Amended SLR Loan Agreement”) with SLR. Pursuant to the First Amendment, the Company was provided with a one-month extension of its covenant-free period through August 31, 2022.
On September 30, 2022, the Company entered into an Amendment No. 2 to the SLR Loan Agreement (the “Second Amendment,” together with the Amended SLR Loan Agreement, as amended, the “Second Amended SLR Loan Agreement”), with SLR. Pursuant to the Second Amendment:
Concurrently with the closing of the Second Amendment, the Company amended and restated SLR’s warrants to purchase 13,421 shares of the Company’s common stock to reset the exercise price to $13.04 per share.
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 the Second Amended SLR Loan Agreement, as amended, the “Third Amended SLR Loan Agreement”) with SLR. Pursuant to the Third Amendment:
In addition, the Third Amendment provided that if the Company raised $15 million of net cash equity proceeds (the “Equity Raise”) prior to July 1, 2023, the 2023 minimum revenue covenant would be waived and the Company need only demonstrate net product revenue of at least $25 million (tested on trailing six-month basis for the period ending September 30, 2023) for the fiscal year ending December 31, 2023. Upon satisfaction of the Equity Raise, the Company’s PIK Interest option would be reduced to up to 4% of the interest rate under the Third Amended SLR Loan Agreement. Concurrently with the closing of the Third Amendment, the Company amended and restated SLR’s warrants to purchase 13,421 shares of the Company’s common stock to reset the exercise price to $3.84 per share.
22
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
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. Under the Fourth Amendment, the PIK Interest option is reduced to 4% of the interest if the Company raises $25 million of net cash equity proceeds prior to July 1, 2023 and is further reduced to 0% of the interest if the Company raises $30 million of net cash equity proceeds prior to January 1, 2024.
Additionally, if the Company elects PIK Interest of 9%, the amount of warrants to be granted 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 provides 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.
Pursuant to the Fifth Amended SLR Loan Agreement, advances under the Fifth 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 SOFR, 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 September 30, 2023, the interest rate was 14.73%. The Company paid interest in-kind totaling $2.4 million and $7.0 million during the three and nine months ended September 30, 2023, respectively. The outstanding balance under the Fifth Amended SLR Loan Agreement was $106.9 million at September 30, 2023. The Fifth Amended SLR Loan Agreement provides for interest-only payments for the first 48 months following the Effective Date. Thereafter, principal payments on the Fifth Amended SLR Loan Agreement 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 Fifth Amended SLR Loan Agreement. The Fifth Amended SLR Loan Agreement will mature on February 1, 2027 (the “Maturity Date”). The Fifth Amended SLR Loan Agreement may be prepaid in full, subject to a prepayment charge of (i) 2.0%, if such prepayment occurs after February 18, 2023 but on or prior to February 17, 2024, and (ii) 1.0%, if such prepayment occurs after February 18, 2024 but on or prior to the 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 Fifth Amended SLR Loan Agreement funded (the “Facility Exit Fee”), which is payable on the earliest to occur of (i) the Maturity Date, (ii) the acceleration of the Fifth Amended SLR Loan Agreement prior to the Maturity Date, and (iii) the prepayment date of the Fifth Amended SLR Loan Agreement prior to the Maturity Date. The Facility Exit Fee of $7.5 million is considered fully earned by SLR as of the Effective Date and is being accrued to interest expense over the term of the Fifth Amended SLR Loan Agreement. In connection with the Fifth 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 $2.1 million and $1.6 million, respectively, as of September 30, 2023. The Fifth Amended SLR Loan Agreement is secured by a lien on substantially all of the assets, including intellectual property, of the Company.
The Fifth 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 Fifth 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 Amended 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 September 30, 2023, the Company was in compliance with all financial covenants under the Fifth Amended SLR Loan Agreement.
The events of default under the Fifth 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 Fifth Amended SLR Loan Agreement or any other loan documents, (2) the Company’s breach or default in the performance of any covenant under the Fifth Amended SLR Loan Agreement, (3) the occurrence of a material adverse effect or an event that is reasonably likely to result in a
23
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 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 Fifth 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 Fifth Amended SLR Loan Agreement. The Company determined the combined probability of an event of default and SLR exercising the Mandatory Prepayment Option to be remote and deemed its fair value to be immaterial as of September 30, 2023. The Company re-evaluates the fair value of the Mandatory Prepayment Option at the end of each reporting period.
The Fifth 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 Fifth Amended SLR Loan Agreement, subject to customary restrictions.
The annual principal maturities of the Company’s Fifth Amended SLR Loan Agreement as of September 30, 2023 are as follows:
2023 (remaining 3 months) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
89,066 |
|
2027 |
|
|
17,813 |
|
Less: Unamortized deferred financing costs |
|
|
(2,454 |
) |
Long-term loans payable |
|
$ |
104,425 |
|
Prior Credit Facilities
On February 18, 2022, the Company used $47.4 million of the SLR Term A Loan Facility to pay off all obligations owing under, and to terminate, its prior Loan and Security Agreement (the “CIBC Loan Agreement”) with CIBC which provided for a revolving loan facility of $12.0 million and a term loan facility of $40.0 million. As a result of the termination of the CIBC Loan Agreement, the Company recorded a loss on extinguishment of debt of $1.1 million, which included the prepayment penalty, write-off of the remaining unamortized deferred financing costs, and legal fees during the three months ended March 31, 2022.
9. Commitments and Contingencies
Lease Commitments
The Company’s operating lease commitments as of December 31, 2022 are described in Note 11 of the notes to the financial statements included in the 2022 Form 10-K.
24
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
The following table presents operating lease cost and information related to operating lease liabilities for the periods indicated:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating lease cost |
|
$ |
1,566 |
|
|
$ |
2,122 |
|
Variable lease cost |
|
|
283 |
|
|
|
347 |
|
Total |
|
$ |
1,849 |
|
|
$ |
2,469 |
|
Operating cash flow impacts: |
|
|
|
|
|
|
||
Cash paid for amounts included in measurement of lease |
|
$ |
2,343 |
|
|
$ |
2,076 |
|
Operating right of use assets obtained in exchange for new |
|
$ |
- |
|
|
$ |
2,824 |
|
Weighted average remaining lease term - operating leases |
|
|
3.4 |
|
|
|
3.6 |
|
Weighted average discount rate - operating leases |
|
|
9.3 |
% |
|
|
8.7 |
% |
As of September 30, 2023, future maturities of lease liabilities under the Company’s noncancelable operating leases are as follows:
|
|
Total Due |
|
|
2023 (remaining 3 months) |
|
$ |
935 |
|
2024 |
|
|
3,236 |
|
2025 |
|
|
1,296 |
|
2026 |
|
|
807 |
|
2027 |
|
|
523 |
|
Thereafter |
|
|
1,129 |
|
Total payments |
|
|
7,926 |
|
Less interest |
|
|
(1,253 |
) |
|
$ |
6,673 |
|
|
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 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 $1.4 million as of September 30, 2023 and was recorded as an operating lease liability in these condensed consolidated financial statements.
25
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
Other Commitments
As of September 30, 2023, the Company has non-cancellable purchase commitments for inventories, capital equipment and services as follows:
|
|
Total Due |
|
|
2023 (remaining 3 months) |
|
$ |
10,006 |
|
2024 |
|
|
3,474 |
|
2025 |
|
|
1,163 |
|
|
|
$ |
14,643 |
|
10. 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. For the three and nine months ended September 30, 2023, the Company incurred restructuring expenses of approximately $0.8 million and $1.0 million, respectively, related to impairments of right-of-use assets, as further discussed below, and termination benefits including severance, benefits and other payroll-related charges. 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 connection with the April 2022 Restructuring and the relocation of manufacturing operations to Mexico, in December 2022, the Company vacated most of its leased space in its Exeter, New Hampshire facility and is in the process of marketing the designated space (“Domain Sublease”) for a sublease or subleases through the remaining term of the operating lease. The Company has not yet secured a sublease tenant or tenants, which triggered an interim impairment assessment during each of the first and third quarters of 2023. The Company re-evaluated its sublease assumptions and timeline based on current market conditions and determined the carrying value of the asset group was not recoverable based on the excess of the carrying value of the asset group over the undiscounted future cash flows. The decrease in the undiscounted future cash flows from the asset group during the first quarter of 2023 was due to a delayed timeline for securing a sublease tenant or tenants. The decrease in the undiscounted future cash flows from the asset group during the third quarter of 2023 was due to the loss of prospective tenants that are no longer interested in subleasing the Company’s leased space. As a result, the Company recognized impairment charges of $0.8 million and $0.9 million for the Domain Sublease asset group, to write down the operating lease right-of-use assets to their estimated fair value during the three and nine months ended September 30, 2023, respectively. The fair values of the operating lease right-of-use assets were estimated using discounted cash flows under the income approach, which the Company considers to be a Level 3 measurement.
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. For the nine months ended September 30, 2023, the Company incurred restructuring expenses of approximately $0.3 million, related to impairments of right-of-use assets, as further discussed below, and termination benefits including severance, benefits and other payroll-related charges. 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.
In connection with the August 2022 Restructuring, in August 2022, the Company’s HGE subsidiary vacated its leased space in Fort Washington, Pennsylvania. In the first quarter of 2023, the Company determined that the operating lease right-of-use asset is considered abandoned due to failed attempts to market the facility for a sublease and the Company no longer expects to sublease the facility through the remaining lease term. As a result, the Company recognized an impairment charge of $0.2 million for asset group, to write off the operating lease right-of-use asset to its estimated fair value during the nine months ended September 30, 2023. The fair
26
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
value of the operating lease right-of-use asset was estimated using discounted cash flows under the income approach, which the Company considers to be a Level 3 measurement.
The following table summarizes the restructuring activity from December 31, 2022 to September 30, 2023:
|
|
Termination Benefits |
|
|
Asset Impairments |
|
|
Total |
|
|||
Balance at December 31, 2022 |
|
$ |
2,474 |
|
|
$ |
- |
|
|
$ |
2,474 |
|
April 2022 Restructuring costs incurred |
|
|
24 |
|
|
|
180 |
|
|
|
204 |
|
August 2022 Restructuring costs incurred |
|
|
32 |
|
|
|
252 |
|
|
|
284 |
|
Non-cash restructuring costs |
|
|
- |
|
|
|
(432 |
) |
|
|
(432 |
) |
Restructuring costs paid |
|
|
(1,914 |
) |
|
|
- |
|
|
|
(1,914 |
) |
Balance at March 31, 2023 |
|
$ |
616 |
|
|
$ |
- |
|
|
$ |
616 |
|
Restructuring costs paid |
|
|
(129 |
) |
|
|
- |
|
|
|
(129 |
) |
Balance at June 30, 2023 |
|
$ |
487 |
|
|
$ |
- |
|
|
$ |
487 |
|
April 2022 Restructuring costs incurred |
|
|
- |
|
|
|
755 |
|
|
|
755 |
|
Non-cash restructuring costs |
|
|
- |
|
|
|
(755 |
) |
|
|
(755 |
) |
Restructuring costs paid |
|
|
(316 |
) |
|
|
- |
|
|
|
(316 |
) |
Balance at September 30, 2023 |
|
$ |
171 |
|
|
$ |
- |
|
|
$ |
171 |
|
The restructuring accrual at September 30, 2023 is expected to be paid by the end of 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:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of revenue |
|
$ |
- |
|
|
$ |
314 |
|
|
$ |
56 |
|
|
$ |
794 |
|
Research and development |
|
|
- |
|
|
|
29 |
|
|
|
- |
|
|
|
595 |
|
Sales and marketing |
|
|
- |
|
|
|
1,101 |
|
|
|
- |
|
|
|
1,989 |
|
General and administrative |
|
|
- |
|
|
|
56 |
|
|
|
- |
|
|
|
446 |
|
Impairment of long-lived and intangible assets |
|
|
755 |
|
|
|
2,139 |
|
|
|
1,187 |
|
|
|
2,139 |
|
Total restructuring expense |
|
$ |
755 |
|
|
$ |
3,639 |
|
|
$ |
1,243 |
|
|
$ |
5,963 |
|
11. Warrants
The Company’s warrant activity is summarized as follows:
|
|
Common Stock Warrants |
|
|||||
|
|
Number of |
|
|
Weighted |
|
||
Outstanding at December 31, 2022 |
|
|
15,564 |
|
|
$ |
18.72 |
|
Warrants granted |
|
|
3,417,114 |
|
|
|
7.67 |
|
Warrants exercised |
|
|
(324,015 |
) |
|
|
0.01 |
|
Warrants cancelled |
|
|
(37 |
) |
|
|
- |
|
Outstanding at September 30, 2023 |
|
|
3,108,626 |
|
|
$ |
8.52 |
|
The Company’s outstanding warrants at September 30, 2023 have exercise prices ranging from $0.008 per share to $112.00 per share and expire at periods ranging from June 10, 2024 through February 10, 2053.
In connection with its PIK Interest option, the Company has granted SLR the PIK Warrants to purchase an aggregate of 128,707 shares of common stock during the nine months ended September 30, 2023. The PIK Warrants had a weighted average
27
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
exercise price of $4.09 per share on the date of grant, were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and have expiration dates ranging from January 3, 2033 through September 1, 2033.
In connection with its February 2023 Private Placement, the Company issued the Pre-Funded Warrants to purchase an aggregate of 550,313 shares of common stock and accompanying Warrants to purchase an aggregate of 2,738,094 shares of common stock. The Pre-Funded Warrants and Warrants were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and expire on February 10, 2053 and February 10, 2028, respectively (see Note 1).
In June 2023, a warrant to purchase 324,015 shares of common stock was exercised. Upon exercise, the exercise price of $0.008 per share was satisfied through payment of cash to the Company.
12. Revenue
Disaggregated Revenue
The following table shows the Company’s net revenue disaggregated into categories the Company considers meaningful:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2023 |
|
|
2023 |
|
||||||||||||||||||
|
|
US |
|
|
International |
|
|
Total |
|
|
US |
|
|
International |
|
|
Total |
|
||||||
Net revenue by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Product revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital equipment |
|
$ |
1,360 |
|
|
$ |
530 |
|
|
$ |
1,890 |
|
|
$ |
6,376 |
|
|
$ |
1,942 |
|
|
$ |
8,318 |
|
Disposable |
|
|
8,309 |
|
|
|
2,861 |
|
|
|
11,170 |
|
|
|
25,535 |
|
|
|
8,979 |
|
|
|
34,514 |
|
Subtotal product revenue |
|
|
9,669 |
|
|
|
3,391 |
|
|
|
13,060 |
|
|
|
31,911 |
|
|
|
10,921 |
|
|
|
42,832 |
|
Lease revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital equipment |
|
|
99 |
|
|
|
86 |
|
|
|
185 |
|
|
|
172 |
|
|
|
259 |
|
|
|
431 |
|
Other |
|
|
319 |
|
|
|
92 |
|
|
|
411 |
|
|
|
979 |
|
|
|
305 |
|
|
|
1,284 |
|
Service and other revenue |
|
|
1,144 |
|
|
|
367 |
|
|
|
1,511 |
|
|
|
3,275 |
|
|
|
1,113 |
|
|
|
4,388 |
|
Total net revenue |
|
$ |
11,231 |
|
|
$ |
3,936 |
|
|
$ |
15,167 |
|
|
$ |
36,337 |
|
|
$ |
12,598 |
|
|
$ |
48,935 |
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2022 |
|
|
2022 |
|
||||||||||||||||||
|
|
US |
|
|
International |
|
|
Total |
|
|
US |
|
|
International |
|
|
Total |
|
||||||
Net revenue by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Product revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital equipment |
|
$ |
1,135 |
|
|
$ |
258 |
|
|
$ |
1,393 |
|
|
$ |
4,602 |
|
|
$ |
1,967 |
|
|
$ |
6,569 |
|
Disposable |
|
|
7,736 |
|
|
|
1,727 |
|
|
|
9,463 |
|
|
|
24,646 |
|
|
|
7,609 |
|
|
|
32,255 |
|
Subtotal product revenue |
|
|
8,871 |
|
|
|
1,985 |
|
|
|
10,856 |
|
|
|
29,248 |
|
|
|
9,576 |
|
|
|
38,824 |
|
Lease revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital equipment |
|
|
55 |
|
|
|
110 |
|
|
|
165 |
|
|
|
370 |
|
|
|
335 |
|
|
|
705 |
|
Other |
|
|
354 |
|
|
|
81 |
|
|
|
435 |
|
|
|
1,075 |
|
|
|
262 |
|
|
|
1,337 |
|
Service and other revenue |
|
|
1,783 |
|
|
|
306 |
|
|
|
2,089 |
|
|
|
6,367 |
|
|
|
905 |
|
|
|
7,272 |
|
Total net revenue |
|
$ |
11,063 |
|
|
$ |
2,482 |
|
|
$ |
13,545 |
|
|
$ |
37,060 |
|
|
$ |
11,078 |
|
|
$ |
48,138 |
|
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 total net revenue for the three or nine months ended September 30, 2023 or 2022.
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
28
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
consolidated balance sheets. The following table presents changes in contract liabilities during the nine months ended September 30, 2023:
|
|
Deferred |
|
|
Other Contract |
|
||
Balance at December 31, 2022 |
|
$ |
1,021 |
|
|
$ |
195 |
|
Additions |
|
|
945 |
|
|
|
119 |
|
Subtractions |
|
|
(843 |
) |
|
|
(195 |
) |
Balance at September 30, 2023 |
|
$ |
1,123 |
|
|
$ |
119 |
|
13. Stock-Based Compensation
As of September 30, 2023, 519,607 shares of common stock were available for issuance under the Vapotherm, Inc. 2018 Equity Incentive Plan (as amended and restated, the “2018 Equity Plan”), assuming actual performance under outstanding performance stock units and after excluding significantly underwater options the Company does not expect will be exercised per the share reserve provision of the 2018 Equity Plan. To date, stock options, performance awards, restricted stock awards, restricted stock units and performance stock units have been granted under the 2018 Equity Plan.
Stock-based compensation expense was allocated based on the employees’ and non-employees’ functions as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of revenue |
|
$ |
37 |
|
|
$ |
193 |
|
|
$ |
135 |
|
|
$ |
620 |
|
Research and development |
|
|
515 |
|
|
|
337 |
|
|
|
1,667 |
|
|
|
1,316 |
|
Sales and marketing |
|
|
736 |
|
|
|
643 |
|
|
|
2,836 |
|
|
|
2,531 |
|
General and administrative |
|
|
910 |
|
|
|
508 |
|
|
|
2,965 |
|
|
|
3,158 |
|
Total |
|
$ |
2,198 |
|
|
$ |
1,681 |
|
|
$ |
7,603 |
|
|
$ |
7,625 |
|
Stock Options
The Company granted options to purchase an aggregate of 109,258 shares of common stock at exercise prices ranging from $3.12 to $21.60 per share, with a weighted average exercise price of $20.68 per share, during the nine months ended September 30, 2023. The Company granted options to purchase an aggregate of 184,837 shares of common stock at exercise prices ranging from $12.40 to $165.68 per share, with a weighted average exercise price of $47.04 per share, during the nine months ended September 30, 2022. The weighted average fair value of stock options granted during the nine months ended September 30, 2023 and 2022 was $17.01 and $34.48 per share, respectively.
The weighted average assumptions used in the Black-Scholes options pricing model are as follows:
|
|
Nine Months Ended September 30, |
||
|
|
2023 |
|
2022 |
Expected dividend yield |
|
0.0% |
|
0.0% |
Risk free interest rate |
|
3.9% |
|
2.7% |
Expected stock price volatility |
|
103.8% |
|
83.8% |
Expected term (years) |
|
6.1 |
|
6.3 |
29
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
Restricted Stock Units
A summary of restricted stock unit activity for the nine months ended September 30, 2023 is as follows:
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average |
|
||
|
|
|
|
|
Grant Date |
|
||
|
|
Shares |
|
|
Fair Value |
|
||
Unvested at December 31, 2022 |
|
|
165,038 |
|
|
$ |
86.15 |
|
Granted |
|
|
43,370 |
|
|
|
10.61 |
|
Vested |
|
|
(36,253 |
) |
|
|
138.58 |
|
Canceled |
|
|
(18,118 |
) |
|
|
54.14 |
|
Unvested at September 30, 2023 |
|
|
154,037 |
|
|
$ |
56.36 |
|
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 nine months ended September 30, 2023 is as follows:
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average |
|
||
|
|
|
|
|
Grant Date |
|
||
|
|
Shares |
|
|
Fair Value |
|
||
Unvested at December 31, 2022 |
|
|
22,211 |
|
|
$ |
150.20 |
|
Granted |
|
|
- |
|
|
|
- |
|
Vested |
|
|
- |
|
|
|
- |
|
Canceled |
|
|
- |
|
|
|
- |
|
Unvested at September 30, 2023 |
|
|
22,211 |
|
|
$ |
150.20 |
|
Employee Stock Purchase Plan
As of September 30, 2023, 113,468 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.
30
VAPOTHERM, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share amounts)
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 2023:
Expected dividend yield |
|
0.0% |
Risk free interest rate |
|
4.8% |
Expected stock price volatility |
|
104.3%-192.5% |
Expected term (years) |
|
0.5 |
14. Net Loss Per Share
As of September 30, 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 (see Note 1).
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 September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Warrants to purchase common stock |
|
|
2,882,328 |
|
|
|
15,564 |
|
Options to purchase common stock |
|
|
459,467 |
|
|
|
396,646 |
|
Unvested restricted stock units and |
|
|
176,248 |
|
|
|
108,240 |
|
Employee stock purchase plan shares |
|
|
19,727 |
|
|
|
8,491 |
|
|
|
|
3,537,770 |
|
|
|
528,941 |
|
15. Related Party Transactions
The Company recorded sales of $0.1 million during each of the three months ended September 30, 2023 and 2022, respectively, and sales of $1.5 million and $0.2 million during the nine months ended September 30, 2023 and 2022, respectively, to an entity customer in which a member of the Company’s board of directors holds a management position. There was a credit of $0.3 million due to this entity customer at September 30, 2023. There were no outstanding balances due from this entity customer at December 31, 2022.
31
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 and nine months ended September 30, 2023, 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 2022 Form 10-K filed with the SEC on February 23, 2023 and in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023. 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 the Vapotherm Access call center business, we are using the underlying technology to develop digital capabilities for our devices. 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 510k clearance from the 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, including the home, although it is presently being marketed primarily for hospital use. As of September 30, 2023, more than 4.1 million patients have been treated with our High Velocity Therapy systems, and we have a global installed base of over 37,400 units, an increase of 3.1% compared to September 30, 2022.
We sell our High Velocity Therapy systems to hospitals through a direct sales organization in the United States, the United Kingdom, Germany, Belgium and Spain and through distributors in other select countries outside of those countries. 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 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. 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 September 30, 2023, we have sold our High Velocity Therapy systems to over 2,400 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.
32
In the first quarter of 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 the 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 completed our move of substantially all of our manufacturing operations from New Hampshire to Mexico and we received our facility certifications and completed validation of our production lines in the first quarter of 2023. In the last half of 2022, we also established a Technology Center in Singapore to bring most research and development projects in-house to help reduce the cost of external design firms and access 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. Actions completed during the first nine months of 2023 under our restructuring plans and their impacts on our condensed consolidated financial statements are further described in Note 10 “Restructuring” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. As a result of this strategy, our net cash used in operating activities decreased to $3.0 million and $19.1 million for the three and nine months ended September 30, 2023, respectively, down from $19.1 million and $69.3 million for the three and nine months ended September 30, 2022, respectively.
On September 27, 2022, we received notice from the New York Stock Exchange, Inc. (the “NYSE”) that we are not in compliance with the continued listing standards set forth in Section 802.01B of the NYSE Listed Company Manual. Such noncompliance of Section 802.01B of the NYSE Listed Company Manual is based on our average global market capitalization for the prior 30 trading-day period being below $50 million at the same time as our stockholders’ equity is less than $50 million. We timely submitted a plan to cure the deficiency on November 11, 2022 that was accepted by the NYSE and we are working to return to compliance with the NYSE continued listing requirements by March 27, 2024 or earlier. In addition, on March 15, 2023, we received notice from the NYSE that we were not in compliance with the continued listing standards set forth in Section 802.01C of the NYSE Listed Company Manual because the average closing price of our common stock was less than $1.00 over a consecutive 30 trading-day period. On September 11, 2023, we received notification from the NYSE that we regained compliance with the minimum share price continued listing standard set forth in Section 802.01C. No assurance can be provided, however, that we will be able to regain compliance with the other applicable NYSE listing standards or otherwise maintain compliance with the NYSE listing standards.
In January of 2023, in coordination with the Medicines and Healthcare products Regulatory Agency in the United Kingdom, we initiated a limited recall of four lots of disposable patient circuits in the United Kingdom, a quantity that is not material. Related to this issue, we proactively notified FDA of this action. Subsequent to this communication, the FDA classified related customer communications as a recall, however, this did not involve the removal of any product. Product defects or other errors resulting in recalls may occur in the future.
On February 7, 2023, we entered into a securities purchase agreement with a select group of institutional and accredited investors through a private placement financing for gross proceeds of approximately $23.0 million, before deducting fees to the placement agent and other offering expenses of $2.1 million. The net proceeds from the offering are being used primarily for sales and marketing, working capital, and other general corporate purposes.
Despite our near-term challenges, we still believe our anticipated long-term growth will be driven by the following strengths:
During the first nine months of 2023, 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
33
serve today, regardless of whether patients are hypoxic, hypercapnic, or otherwise suffering respiratory distress. Net revenue increased $1.6 million, or 12.0%, to $15.2 million for the three months ended September 30, 2023 compared to $13.5 million for the three months ended September 30, 2022. After excluding net revenue from the Vapotherm Access call center business, on an adjusted non-GAAP basis, net revenue increased $2.3 million, or 17.6%, for the three months ended September 30, 2023 compared to the same prior year period in 2022. Net revenue increased $0.8 million, or 1.7%, to $48.9 million for the nine months ended September 30, 2023 from $48.1 million for the nine months ended September 30, 2022. After excluding net revenue from the Vapotherm Access call center business, on an adjusted non-GAAP basis, net revenue increased $3.5 million, or 7.7%, for the nine months ended September 30, 2023 compared to the same prior year period in 2022. Revenue from single-use disposables represented approximately 70.5% and 67.0% of our net revenue for the nine months ended September 30, 2023 and 2022, respectively, and increased 7.0% on a year over year basis. We believe our strategy will allow us to return our disposable 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 capital and disposable average selling prices as we introduce new higher-value products and services. Presently, we are also working on several initiatives to drive down our inventory balance and return our inventory turnover to pre-COVID-19 historical levels and we have converted approximately $9.2 million of inventory to cash during the first nine months of 2023.
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 sale prices of our products, support regulatory submissions, and demonstrate the clinical efficacy of our new products. While these and other actions put pressure on our margins and adversely affected our financial results during the first half of 2023, we anticipate long-term benefits of these past and anticipated future actions, including lower cost products being built in our new 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 may require additional funding, which could include equity and/or debt financings.
Results of Operations
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net revenue |
|
$ |
15,167 |
|
|
$ |
13,545 |
|
|
$ |
48,935 |
|
|
$ |
48,138 |
|
Cost of revenue |
|
|
9,154 |
|
|
|
11,682 |
|
|
|
29,850 |
|
|
|
36,018 |
|
Gross profit |
|
|
6,013 |
|
|
|
1,863 |
|
|
|
19,085 |
|
|
|
12,120 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
3,132 |
|
|
|
4,382 |
|
|
|
10,842 |
|
|
|
16,241 |
|
Sales and marketing |
|
|
7,967 |
|
|
|
11,460 |
|
|
|
25,835 |
|
|
|
36,615 |
|
General and administrative |
|
|
4,430 |
|
|
|
6,477 |
|
|
|
15,219 |
|
|
|
20,754 |
|
Impairment of goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,701 |
|
Impairment of long-lived and intangible assets |
|
|
755 |
|
|
|
2,139 |
|
|
|
1,187 |
|
|
|
6,175 |
|
Loss on disposal of property and equipment |
|
|
- |
|
|
|
321 |
|
|
|
53 |
|
|
|
321 |
|
Total operating expenses |
|
|
16,284 |
|
|
|
24,779 |
|
|
|
53,136 |
|
|
|
94,807 |
|
Loss from operations |
|
|
(10,271 |
) |
|
|
(22,916 |
) |
|
|
(34,051 |
) |
|
|
(82,687 |
) |
Other expense, net |
|
|
(4,841 |
) |
|
|
(3,293 |
) |
|
|
(13,905 |
) |
|
|
(9,061 |
) |
Net loss before income taxes |
|
|
(15,112 |
) |
|
|
(26,209 |
) |
|
|
(47,956 |
) |
|
|
(91,748 |
) |
Provision (benefit) for income taxes |
|
|
18 |
|
|
|
(8 |
) |
|
|
52 |
|
|
|
74 |
|
Net loss |
|
$ |
(15,130 |
) |
|
$ |
(26,201 |
) |
|
$ |
(48,008 |
) |
|
$ |
(91,822 |
) |
34
Revenue
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||||||||||||||
|
|
(in thousands, except percentages) |
|
|||||||||||||||||||||
|
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
|
$ |
|
|
% |
|
||||||
Product revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital equipment |
|
$ |
1,890 |
|
|
|
12.5 |
% |
|
$ |
1,393 |
|
|
|
10.3 |
% |
|
$ |
497 |
|
|
|
35.7 |
% |
Disposables |
|
|
11,170 |
|
|
|
73.6 |
% |
|
|
9,463 |
|
|
|
69.9 |
% |
|
|
1,707 |
|
|
|
18.0 |
% |
Subtotal product revenue |
|
|
13,060 |
|
|
|
86.1 |
% |
|
|
10,856 |
|
|
|
80.2 |
% |
|
|
2,204 |
|
|
|
20.3 |
% |
Lease revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital equipment |
|
$ |
185 |
|
|
|
1.2 |
% |
|
$ |
165 |
|
|
|
1.2 |
% |
|
$ |
20 |
|
|
|
12.12 |
% |
Other |
|
|
411 |
|
|
|
2.7 |
% |
|
|
435 |
|
|
|
3.2 |
% |
|
|
(24 |
) |
|
|
(5.5 |
)% |
Service and other revenue |
|
|
1,511 |
|
|
|
10.0 |
% |
|
|
2,089 |
|
|
|
15.4 |
% |
|
|
(578 |
) |
|
|
(27.7 |
)% |
Total net revenue |
|
$ |
15,167 |
|
|
|
100.0 |
% |
|
$ |
13,545 |
|
|
|
100.0 |
% |
|
$ |
1,622 |
|
|
|
12.0 |
% |
Net revenue increased $1.6 million, or 12.0%, to $15.2 million for the third quarter of 2023 compared to $13.5 million for the third quarter of 2022. The increase in net revenue was primarily attributable to increases of $1.7 million and $0.5 million in disposables revenue and capital equipment revenue, respectively, partially offset by a $0.6 million decrease in service and other revenue. Disposables revenue increased 18.0% in the third quarter of 2023 primarily due to an increase in the number of disposables sold in our International markets and an increase in demand for our products compared to the same prior year period. Capital equipment revenue increased 35.7% in the third quarter of 2023 due to an increase in volume of sales of capital equipment and higher average sale prices of our High Velocity Therapy units realized from our next generation HVT 2.0 platform. The decrease in service and other revenue in the third quarter of 2023 was primarily the result of our exit from the Vapotherm Access call center business in October 2022.
Net revenue information by geography is summarized as follows:
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||||||||||||||
|
|
(in thousands, except percentages) |
|
|||||||||||||||||||||
|
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
|
$ |
|
|
% |
|
||||||
United States |
|
$ |
11,231 |
|
|
|
74.0 |
% |
|
$ |
11,063 |
|
|
|
81.7 |
% |
|
$ |
168 |
|
|
|
1.5 |
% |
International |
|
|
3,936 |
|
|
|
26.0 |
% |
|
|
2,482 |
|
|
|
18.3 |
% |
|
|
1,454 |
|
|
|
58.6 |
% |
Total net revenue |
|
$ |
15,167 |
|
|
|
100.0 |
% |
|
$ |
13,545 |
|
|
|
100.0 |
% |
|
$ |
1,622 |
|
|
|
12.0 |
% |
Net revenue generated in the United States increased $0.2 million, or 1.5%, to $11.2 million for the third quarter of 2023, compared to $11.1 million for the third quarter of 2022. Net revenue generated in our International markets increased $1.5 million, or 58.6%, to $3.9 million for the third quarter of 2023, compared to $2.5 million for the third quarter of 2022. The increase in net revenue in the United States was primarily due to increases in the volume of sales of capital equipment and higher average sale prices of our High Velocity Therapy units and related disposables realized from our next generation HVT 2.0 platform, partially offset by a decrease in the number of disposables sold. The increase in net revenue in International markets was primarily due to an increase in the number of disposables sold and the volume of sales of capital equipment.
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||||||||||||||
|
|
(in thousands, except percentages) |
|
|||||||||||||||||||||
|
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
|
$ |
|
|
% |
|
||||||
Product revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital equipment |
|
$ |
8,318 |
|
|
|
17.0 |
% |
|
$ |
6,569 |
|
|
|
13.6 |
% |
|
$ |
1,749 |
|
|
|
26.6 |
% |
Disposables |
|
|
34,514 |
|
|
|
70.5 |
% |
|
|
32,255 |
|
|
|
67.0 |
% |
|
|
2,259 |
|
|
|
7.0 |
% |
Subtotal product revenue |
|
|
42,832 |
|
|
|
87.5 |
% |
|
|
38,824 |
|
|
|
80.6 |
% |
|
|
4,008 |
|
|
|
10.3 |
% |
Lease revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital equipment |
|
|
431 |
|
|
|
0.9 |
% |
|
|
705 |
|
|
|
1.5 |
% |
|
|
(274 |
) |
|
|
(38.9 |
)% |
Other |
|
|
1,284 |
|
|
|
2.6 |
% |
|
|
1,337 |
|
|
|
2.8 |
% |
|
|
(53 |
) |
|
|
(4.0 |
)% |
Service and other revenue |
|
|
4,388 |
|
|
|
9.0 |
% |
|
|
7,272 |
|
|
|
15.1 |
% |
|
|
(2,884 |
) |
|
|
(39.7 |
)% |
Total net revenue |
|
$ |
48,935 |
|
|
|
100.0 |
% |
|
$ |
48,138 |
|
|
|
100.0 |
% |
|
$ |
797 |
|
|
|
1.7 |
% |
35
Net revenue increased $0.8 million, or 1.7%, to $48.9 million for the first nine months of 2023 compared to $48.1 million for the first nine months of 2022. The increase in net revenue was primarily attributable to increases of $2.3 million and $1.7 million in disposables revenue and capital equipment revenue, respectively, partially offset by decreases of $2.9 million and $0.3 million in service and other revenue, and capital equipment lease revenue, respectively. Disposables revenue increased 7.0% in the first nine months of 2023 primarily due to an increase in the number of disposables sold in our International markets. Capital equipment revenue increased 26.6% in the first nine months of 2023 primarily due to higher average sale prices of our High Velocity Therapy units realized from our next generation HVT 2.0 platform, and to a lesser extent an increase in volume of sales of capital equipment in the United States. The increases in capital equipment revenue and disposables revenue were partially offset by the Omicron surge that drove significant demand in the first quarter of 2022 and did not repeat itself in the current year period. The decrease in service and other revenue in the first nine months of 2023 was primarily the result of our exit from the Vapotherm Access call center business in October 2022. Capital equipment lease revenue decreased 38.9% in the first nine months of 2023 due to a decrease in rental arrangements.
Net revenue information by geography is summarized as follows:
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||||||||||||||
|
|
(in thousands, except percentages) |
|
|||||||||||||||||||||
|
|
Amount |
|
|
% of Revenue |
|
|
Amount |
|
|
% of Revenue |
|
|
$ |
|
|
% |
|
||||||
United States |
|
$ |
36,337 |
|
|
|
74.3 |
% |
|
$ |
37,060 |
|
|
|
77.0 |
% |
|
$ |
(723 |
) |
|
|
(2.0 |
)% |
International |
|
|
12,598 |
|
|
|
25.7 |
% |
|
|
11,078 |
|
|
|
23.0 |
% |
|
|
1,520 |
|
|
|
13.7 |
% |
Total net revenue |
|
$ |
48,935 |
|
|
|
100.0 |
% |
|
$ |
48,138 |
|
|
|
100.0 |
% |
|
$ |
797 |
|
|
|
1.7 |
% |
Net revenue generated in the United States decreased $0.7 million, or 2.0%, to $36.3 million for the first nine months of 2023, compared to $37.1 million for the first nine months of 2022. Net revenue generated in our International markets increased $1.5 million, or 13.7%, to $12.6 million for the first nine months of 2023, compared to $11.1 million for the first nine months of 2022. The decrease in net revenue in the United States was primarily the result of our exit from the Vapotherm Access call center business in October 2022 and decrease in the number of disposables sold due to the Omicron surge that drove significant demand in the first quarter of 2022 and did not repeat itself in the current year period. These decreases were partially offset by an increase in volume of sales of capital equipment in the United States and higher average sale prices of our High Velocity Therapy units realized from our next generation HVT 2.0 platform. The increase in net revenue in our International markets was primarily due to increases in the number of disposables sold resulting from higher demand, partially offset by a decrease in volume of sales of capital equipment.
Cost of Revenue and Gross Profit
Cost of revenue decreased $2.5 million, or 21.6%, to $9.2 million in the third quarter of 2023 compared to $11.7 million in the third quarter of 2022. Cost of revenue decreased $6.2 million, or 17.1%, to $29.9 million in the first nine months of 2023 compared to $36.0 million in the first nine months of 2022.
The decrease for both comparison periods was primarily due to lower production costs from our facility in Mexico, lower reserves for excess and obsolete inventory, our exit from the Vapotherm Access call center business in October 2022, a decrease in stock-based compensation, and certain non-recurring charges related to the transfer of certain activities to our contract manufacturer in the first nine months of 2022 that did not repeat in the current year period, partially offset by increases in shipping expense of inventory to and from our facility in Mexico and depreciation expense in the third quarter and first nine months of 2023. In addition, in the third quarter of 2023, we increased production capacity at our facility in Mexico in advance of the respiratory syncytial virus and influenza seasons in the Northern Hemisphere, which resulted in inefficiencies such as higher scrap rates, lower first pass yields and higher freight costs which the Company did not experience in the second quarter of 2023.
Gross profit as a percent of revenue increased to 39.6% in the third quarter of 2023 compared to 13.8% in the third quarter of 2022 and increased to 39.0% in the first nine months of 2023 compared to 25.2% in the first nine months of 2022. These increases were positively impacted by an increase in net revenue, lower reserves for excess and obsolete inventory, lower production costs from our facility in Mexico and our exit from the Vapotherm Access call center business in October 2022, in each case, during the respective current year period compared to the respective prior year period. These increases were partially offset by inefficiencies at our facility in Mexico discussed in the preceding paragraph.
36
Research and Development Expenses
Research and development expenses decreased $1.3 million, or 28.5%, to $3.1 million in the third quarter of 2023 compared to $4.4 million in the third quarter of 2022. As a percentage of revenue, research and development expenses decreased to 20.7% in the third quarter of 2023 compared to 32.4% in the third quarter of 2022.
Research and development expenses decreased $5.4 million, or 33.2%, to $10.8 million in the first nine months of 2023 compared to $16.2 million in the first nine months of 2022. As a percentage of revenue, research and development expenses decreased to 22.2% in the first nine months of 2023 compared to 33.7% in the first nine months of 2022.
The decrease in research and development expenses and as a percentage of net revenue for both comparison periods was primarily due to cost reductions from our path-to-profitability initiatives implemented during the second half of 2022 consisting of decreased product consulting expenses, development costs, employee-related expenses, and grant reimbursement not included in the prior year periods, partially offset by an increase in stock-based compensation. The decrease in research and development expenses as a percentage of revenue for the third quarter of 2023 was also due to an increase in net revenue during the same period.
Sales and Marketing Expenses
Sales and marketing expenses decreased $3.5 million, or 30.5%, to $8.0 million in the third quarter of 2023 compared to $11.5 million in the third quarter of 2022. As a percentage of revenue, sales and marketing expenses decreased to 52.5% in the third quarter of 2023 compared to 84.6% in the third quarter of 2022.
Sales and marketing expenses decreased $10.8 million, or 29.4%, to $25.8 million in the first nine months of 2023 compared to $36.6 million in the first nine months of 2022. As a percentage of revenue, sales and marketing expenses decreased to 52.8% in the first nine months of 2023 compared to 76.1% in the first nine months of 2022.
The decrease in sales and marketing expenses and as a percentage of net revenue for both comparison periods was primarily due to cost reductions from our path-to-profitability initiatives implemented during the second half of 2022 consisting of decreased employee-related expenses, sales commission expenses, severance costs, travel expenses and advertising expenses, partially offset by an increase in stock-based compensation. The decrease in sales and marketing expenses as a percentage of revenue for the third quarter of 2023 was also due to an increase in net revenue during the same period.
General and Administrative Expenses
General and administrative expenses decreased $2.0 million, or 31.6%, to $4.4 million in the third quarter of 2023 compared to $6.5 million in the third quarter of 2022. As a percentage of revenue, general and administrative expenses decreased to 29.2% in the third quarter of 2023 compared to 47.8% in the third quarter of 2022.
General and administrative expenses decreased $5.5 million, or 26.7%, to $15.2 million in the first nine months of 2023 compared to $20.8 million in the first nine months of 2022. As a percentage of revenue, general and administrative expenses decreased to 31.1% in the first nine months of 2023 compared to 43.1% in the first nine months of 2022.
The decrease in general and administrative expenses and as a percentage of net revenue for both comparison periods was primarily due to cost reductions from our path-to-profitability initiatives implemented during the second half of 2022 consisting of decreased employee-related expenses, consulting and legal expenses, non-cash lease expense and depreciation expense. These decreases were partially offset by favorable changes in value of contingent consideration in the third quarter and first nine months of 2022 that did not recur in the current year periods. The decrease in general and administrative expenses as a percentage of revenue for the third quarter of 2023 was also due to an increase in net revenue during the same period.
37
Impairment of Goodwill
Impairment of goodwill totaled $14.7 million during the third quarter and first nine months of 2022 and related to the write down of goodwill of the Vapotherm Access reporting unit to its estimated fair value. There were no goodwill impairment charges recorded in the third quarter or first nine months of 2023.
Impairment of Long-Lived and Intangible Assets
Impairment of long-lived and intangible assets totaled $0.8 million and $1.2 million during the third quarter and first nine months of 2023, respectively, and related to the write down of operating lease right-of-use assets no longer deemed to be recoverable.
Impairment of long-lived and intangible assets totaled $2.1 million during the third quarter of 2022 and related to the write down of operating lease right-of-use assets no longer deemed to be recoverable. Impairment of long-lived and intangible assets totaled $6.2 million during the first nine months of 2022 and related to the write down of operating lease right-of-use assets, Vapotherm Access customer relationships and developed technology no longer deemed to be recoverable.
Loss on Disposal of Property and Equipment
We recorded a loss on disposal of certain property and equipment of $0.1 million during the first nine months of 2023. We recorded a loss on disposal of certain property and equipment of $0.3 million during the third quarter and first nine months of 2022. There was no such loss recorded in the third quarter of 2023.
Other Expense, Net
Other expense, net increased $1.5 million, or 47.0%, to $4.8 million in the third quarter of 2023 compared to $3.3 million in the third quarter of 2022. Other expense, net increased $4.8 million, or 53.5%, to $13.9 million in the first nine months of 2023 compared to $9.1 million in the first nine months of 2022. The increase in other expense, net for both comparison periods was primarily due to an increase in interest expense due to higher average interest rates on higher average outstanding borrowings during the current year periods compared to the same prior year periods in 2022. The increase in the first nine months of 2023 was partially offset by a loss on extinguishment in the first nine months of 2022 that did not repeat itself in the current year period.
Provision (Benefit) for Income Taxes
The provision for income taxes for the third quarter and first nine months of 2023 totaled less than $0.1 million and $0.1 million, respectively, and in each case related to income earned by our foreign subsidiaries after accounting for transfer pricing adjustments.
The benefit for income taxes for the third quarter of 2022 totaled less than $0.1 million and related to a benefit for net deferred income tax assets deemed more likely than not to be realized by our foreign subsidiaries. The provision for income taxes for the first nine months of 2022 totaled $0.1 million and related to deferred tax liabilities for differences in the book and tax basis of indefinite-lived assets, partially offset by a benefit for net deferred income tax assets deemed more likely than not to be realized by our foreign subsidiaries. We have not recorded any federal or state income tax benefits related to domestic operating losses in either period due to uncertainty about future taxable income.
Liquidity and Capital Resources
As of September 30, 2023, we had cash, cash equivalents and restricted cash of $15.5 million, working capital of $33.0 million and an accumulated deficit of $538.0 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.
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 2,738,083 shares of common stock at a purchase 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.
38
We anticipate that our cash, cash equivalents, restricted cash and working capital will be sufficient to meet our capital requirements for at least the next 12 months from the filing of this report. If these sources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity securities or enter into new or restructure existing debt financing arrangements. If we raise additional funds by issuing equity securities, our stockholders would experience dilution. Additional debt financing, if available, may involve additional covenants restricting our operations or our ability to incur additional debt. Any additional debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders. Additional financing may not be available at all or may be available only in amounts or on terms unacceptable to us. If we are unable to obtain additional financing, we may be required to delay the development, commercialization and marketing of our products and services.
Cash Flows
The following table presents a summary of our cash flows for the periods indicated:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(20,347 |
) |
|
$ |
(69,265 |
) |
Investing activities |
|
|
(1,962 |
) |
|
|
(8,266 |
) |
Financing activities |
|
|
21,023 |
|
|
|
50,167 |
|
Effect of exchange rate on cash, cash equivalents and restricted cash |
|
|
(34 |
) |
|
|
(142 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
(1,320 |
) |
|
$ |
(27,506 |
) |
Operating Activities
The net cash used in operating activities was $20.3 million in the first nine months of 2023 and consisted primarily of a net loss of $48.0 million, partially offset by non-cash charges of $22.6 million and a decrease in net operating assets of $5.2 million. Non-cash charges for the first nine months of 2023 consisted primarily of stock-based compensation expense, interest paid in-kind, depreciation and amortization expense, impairment of long-lived and intangible assets and non-cash lease expense.
The net cash used in operating activities was $69.3 million in the first nine months of 2022 and consisted primarily of a net loss of $91.8 million and an increase in net operating assets of $13.5 million, partially offset by $36.0 million in non-cash charges. Non-cash charges for the first nine months of 2022 consisted primarily of impairment of goodwill, stock-based compensation expense, impairment of long-lived and intangible assets, and depreciation and amortization expense, partially offset by the change in fair value of contingent consideration.
Investing Activities
Net cash used in investing activities for the first nine months of 2023 and 2022 consisted of purchases of property and equipment of $2.0 million and $8.3 million, respectively.
Financing Activities
Net cash provided by financing activities was $21.0 million in the first nine months of 2023 and consisted primarily of net proceeds from the issuance of securities in the February 2023 private placement of $20.9 million and proceeds from common stock issuances in connection with our ESPP of $0.1 million.
Net cash used in financing activities was $50.2 million in the first nine months of 2022 and consisted primarily of net proceeds under our credit facilities of $52.5 million, proceeds received from the exercise of stock options of $0.1 million and proceeds from common stock issuances in connection with our ESPP of $0.1 million, partially offset by payments of debt issuance costs of $1.6 million, debt extinguishment costs of $0.8 million and contingent consideration payments of $0.1 million.
Credit Facilities
On February 18, 2022 (the “Effective Date”), we entered into a Loan and Security Agreement (the “SLR Loan Agreement”) with SLR Investment Corp. (“SLR”) which provided for a term A loan facility of $100.0 million (the “SLR Term A Loan Facility”) and a term B loan facility of $25.0 million (the “SLR Term B Loan Facility”). The SLR Term A Loan Facility was funded to us on the Effective Date. In connection with this funding, we granted 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
39
part, and expire in February 2032. The SLR Term B Loan Facility was available to us upon achievement of a certain minimum revenue level as more fully described in the SLR Loan Agreement. The proceeds of the SLR Term A Loan Facility were used to repay all indebtedness under our prior loan agreement with Canadian Imperial Bank of Commerce Innovation Banking (“CIBC”), as described below.
On August 1, 2022, we entered into an Amendment No. 1 to the SLR Loan Agreement (the “First Amendment,” together with the SLR Loan Agreement, as amended, the “Amended SLR Loan Agreement”) with SLR. Pursuant to the First Amendment, we were provided with a one-month extension of our covenant-free period through August 31, 2022.
On September 30, 2022, we entered into an Amendment No. 2 to the SLR Loan Agreement (the “Second Amendment,” together with the Amended SLR Loan Agreement, as amended, the “Second Amended SLR Loan Agreement”), with SLR. Pursuant to the Second Amendment:
Concurrently with the closing of the Second Amendment, we amended and restated SLR’s warrants to purchase 13,421 shares of our common stock to reset the exercise price to $13.04 per share.
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 the Second Amended SLR Loan Agreement, as amended, the “Third Amended SLR Loan Agreement”) with SLR. Pursuant to the Third Amendment;
In addition, the Third Amendment provided that if we raised $15 million of net cash equity proceeds (the “Equity Raise”) prior to July 1, 2023, the 2023 minimum revenue covenant would be waived and we need only demonstrate net product revenue of at least $25 million (tested on trailing six-month basis for the period ending September 30, 2023) for the fiscal year ending December 31, 2023. Upon satisfaction of the Equity Raise, our PIK Interest option would be reduced to up to 4% of the interest rate under the Third Amended SLR Loan Agreement. Concurrently with the closing of the Third Amendment, we amended and restated SLR’s warrants to purchase 13,421 shares of our common stock to reset the exercise price to $3.84 per share.
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. Under the Fourth Amendment, the PIK Interest option is reduced to 4% of the interest if we raise $25 million of net cash equity proceeds prior to July 1, 2023 and is further reduced to 0% of the interest if we raise $30 million of net cash equity proceeds prior to January 1, 2024.
40
Additionally, if we elect PIK Interest of 9%, the amount of warrants to be granted 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 provides 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.
Pursuant to the Fifth Amended SLR Loan Agreement, advances under the Fifth 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 SOFR, 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 September 30, 2023, the interest rate was 14.73%. We paid interest in-kind totaling $2.4 million and $7.0 million during the three and nine months ended September 30, 2023, respectively. The outstanding balance under the Fifth Amended SLR Loan Agreement was $106.9 million at September 30, 2023. The Fifth Amended SLR Loan Agreement provides for interest-only payments for the first 48 months following the Effective Date. Thereafter, principal payments on the Fifth Amended SLR Loan Agreement 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 Fifth Amended SLR Loan Agreement. The Fifth Amended SLR Loan Agreement will mature on February 1, 2027 (the “Maturity Date”). The Fifth Amended SLR Loan Agreement may be prepaid in full, subject to a prepayment charge of (i) 2.0%, if such prepayment occurs after February 18, 2023 but on or prior to February 17, 2024, and (ii) 1.0%, if such prepayment occurs after February 18, 2024 but on or prior to the 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 Fifth Amended SLR Loan Agreement funded (the “Facility Exit Fee”), which is payable on the earliest to occur of (i) the Maturity Date, (ii) the acceleration of the Fifth Amended SLR Loan Agreement prior to the Maturity Date, and (iii) the prepayment date of the Fifth Amended SLR Loan Agreement prior to the Maturity Date. The Facility Exit Fee of $7.5 million is considered fully earned by SLR as of the Effective Date and is being accrued to interest expense over the term of the Fifth Amended SLR Loan Agreement. In connection with the Fifth 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 $2.1 million and $1.6 million, respectively, as of September 30, 2023. The Fifth Amended SLR Loan Agreement is secured by a lien on substantially all of our assets, including intellectual property.
The Fifth 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 Fifth 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 Amended 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 September 30, 2023, we were in compliance with all financial covenants under the Fifth Amended SLR Loan Agreement.
The events of default under the Fifth 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 Fifth Amended SLR Loan Agreement or any other loan documents, (2) our breach or default in the performance of any covenant under the Fifth 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 Fifth 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 Fifth Amended SLR Loan Agreement. We determined the combined probability of an event of default and SLR exercising the Mandatory Prepayment Option to be remote and deemed its fair value to be immaterial as of September 30, 2023. We re-evaluate the fair value of the Mandatory Prepayment Option at the end of each reporting period.
The Fifth 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 Fifth Amended SLR Loan Agreement, subject to customary restrictions.
41
On February 18, 2022, we used $47.4 million of the SLR Term A Loan Facility to pay off all obligations owing under, and to terminate, our prior Loan and Security Agreement (the “CIBC Loan Agreement”) with CIBC which provided for a revolving loan facility of $12.0 million and a term loan facility of $40.0. million. As a result of the termination of the CIBC Loan Agreement, we recorded a loss on extinguishment of debt of $1.1 million, which included the prepayment penalty, write-off of the remaining unamortized deferred financing costs, and legal fees during the first quarter of 2022.
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. The critical accounting policies that we believe affect our more significant judgements and estimates used in the preparation of our condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.
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.
Non-GAAP Financial Measures
In this Quarterly Report on Form 10-Q, we use certain non-GAAP financial measures, including non-GAAP net revenue excluding Vapotherm Access and the growth of non-GAAP net revenue excluding Vapotherm Access. These non-GAAP financial measures are presented to provide investors additional information to facilitate the comparison of our past and present operations. We believe these non-GAAP financial measures provide useful information to investors because they are used to evaluate our performance on a comparable year-over-year basis. These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of our non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP. These measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures. Accordingly, we qualify our use of non-GAAP financial information in a statement when non-GAAP financial information is presented.
The following table contains a reconciliation of net revenue to non-GAAP net revenue excluding Vapotherm Access for each of the three and nine months ended September 30, 2023 and 2022 and the growth of such net revenue and non-GAAP net revenue excluding Vapotherm Access over the prior year periods. Non-GAAP net revenue excluding Vapotherm Access and the growth of non-GAAP net revenue excluding Vapotherm Access are non-GAAP financial measures we use as supplemental measures in evaluating revenue performance. We completed our exit from the Vapotherm Access call center business in October 2022 and we believe the measures are relevant and useful to investors in understanding the change in our revenues on a comparable basis over the prior year periods. We define non-GAAP net revenue excluding Vapotherm Access as net revenue less net revenue of the Vapotherm Access call center business.
|
|
Three Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(Unaudited) |
|
(in thousands, except percentages) |
|
|||||||||||||
GAAP net revenue |
|
$ |
15,167 |
|
|
$ |
13,545 |
|
|
$ |
1,622 |
|
|
|
12.0 |
% |
Vapotherm Access net revenue |
|
|
- |
|
|
|
(653 |
) |
|
|
653 |
|
|
|
(100.0 |
)% |
Non-GAAP net revenue excluding Vapotherm Access |
|
$ |
15,167 |
|
|
$ |
12,892 |
|
|
$ |
2,275 |
|
|
|
17.6 |
% |
42
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(Unaudited) |
|
(in thousands, except percentages) |
|
|||||||||||||
GAAP net revenue |
|
$ |
48,935 |
|
|
$ |
48,138 |
|
|
$ |
797 |
|
|
|
1.7 |
% |
Vapotherm Access net revenue |
|
|
- |
|
|
|
(2,687 |
) |
|
|
2,687 |
|
|
|
(100.0 |
)% |
Non-GAAP net revenue excluding Vapotherm Access |
|
$ |
48,935 |
|
|
$ |
45,451 |
|
|
$ |
3,484 |
|
|
|
7.7 |
% |
43
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 Fifth Amended SLR Loan Agreement and interest rates associated with our invested cash balances. Borrowings under our Fifth 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 September 30, 2023, the interest rate was 14.73%. As of September 30, 2023, borrowings under our Fifth Amended SLR Loan Agreement totaled $106.9 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 September 30, 2023, we had cash invested in money market deposits of $4.3 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 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 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 9.0% and 7.8% of consolidated net revenue for the three months ended September 30, 2023 and 2022, respectively. Revenue denominated in currencies other than the U.S. dollar represented approximately 8.0% and 6.9% of consolidated net revenue for the nine months ended September 30, 2023 and 2022, respectively. Total assets denominated in currencies other than the U.S. dollar represented approximately 7.6% and 5.5% of our total assets at September 30, 2023 and December 31, 2022, respectively. There were no material assets denominated in the Mexican peso at September 30, 2023 or December 31, 2022. 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 three and nine months ended September 30, 2023, we continued to experience inflationary pressures on transportation and commodities costs, which we expect to continue for the remainder of 2023. 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.
44
ITEM 4. 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 September 30, 2023. 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 September 30, 2023, 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.
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).
45
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 2022 Form 10-K which could materially affect our business, financial condition or future results. Except as set forth below, 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 23, 2023.
If we fail to continue to meet the listing requirements of the NYSE, our common stock may be delisted from the NYSE, and if we are unable to list our common stock on the NYSE or another exchange such as Nasdaq, we could face significant adverse consequences.
Our common stock is listed on the NYSE. The NYSE requires us to continue to meet certain listing standards, including standards related to our global market capitalization, stockholders’ equity and average closing share price. Specifically, the quantitative continued listing standards applicable to us include the following:
We would be considered “below criteria” by NYSE Regulation if we trigger any one of the above standards. If we do not meet the NYSE’s continued listing standards, we will be notified by the NYSE and required to take corrective action to meet the continued listing standards; otherwise our common stock will be delisted from the NYSE. If our common stock is delisted from the NYSE and we are unable to correct this or list our common stock on another exchange such as Nasdaq, we could face significant adverse consequences including:
As previously disclosed on October 3, 2022, we received written notice from the NYSE that we do not satisfy the listing requirements. In order to avoid delisting, we have 45 days from the receipt of the notice to submit a plan to bring the company into conformity with continued listed standards within 18 months of receipt of the notice. If the plan is not submitted on a timely basis or is not accepted by the NYSE, the NYSE could initiate delisting proceedings. We timely filed a plan to cure this deficiency with the NYSE on November 11, 2022 (the “Plan”). We received a plan acceptance letter from the NYSE indicating it had accepted our previously submitted business plan to cure our non-compliance with our market capitalization requirement. As set forth in the acceptance letter, the NYSE will continue listing our common stock and will perform quarterly reviews for an 18-month period that started September 27, 2022 (the date the delisting notice was received by us) for compliance with the goals and initiatives outlined in
46
our business plan, which are consistent with the key initiatives we have publicly disclosed. We will need to achieve the minimum continued listing standards of either average global market capitalization over a consecutive 30 trading-day period of $50 million or total stockholders’ equity of $50 million at the completion of the 18-month period. We may fail to satisfy the required steps and, consequently, fail to maintain the listing of our common stock on the NYSE.
In addition, as previously disclosed, on March 15, 2023, we received notice from the NYSE that we are not in compliance with the continued listing standards set forth in Section 802.01C of the NYSE Listed Company Manual because the average closing price of our common stock was less than $1.00 over a consecutive 30 trading-day period. On September 11, 2023, we received notification from the NYSE that we regained compliance with the minimum share price continued listing standard set forth in Section 802.01C. No assurance can be provided, however, that we will be able to regain compliance with the other applicable NYSE listing standards or otherwise maintain compliance with the NYSE listing standards. Any suspension of trading or delisting of our common stock from the NYSE would reduce liquidity in our common stock and may result in a decline in the market price of our common stock. In addition, our ability to raise additional necessary capital through equity or debt financing, and attract and retain personnel by means of equity compensation, would be impaired.
Adverse developments with respect to the stability of financial institutions we do business with, or unstable banking, credit and/or capital market conditions generally, or the perception thereof, could adversely affect our ability to access cash, obtain additional financing, restructure or refinance our indebtedness, or meet our liquidity and debt service requirements.
The potential future disruptions in access to bank deposits or lending commitments due to bank failure, could materially and adversely affect our liquidity, business, financial condition and stock price. The closures of Silicon Valley Bank and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation (“FDIC”) created bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at Silicon Valley Band and Signature Bank would have access to their funds, even those in excess of the standard FDIC insurance limits, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages. Although we did not have deposits at Silicon Valley Bank or Signature Bank, the failure of any bank in which we deposit our funds or otherwise do business could reduce the amount of cash we have available to fund our operations or delay our ability to access such funds. Any such failure may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. In the event we have a commercial relationship with a bank or lender that has failed or is otherwise distressed or if other banks and financial institutions enter receivership or become insolvent in the future, we may experience delays or other issues in accessing our cash and meeting our financial obligations. In addition, any future unstable banking, credit and/or capital market conditions could also adversely affect our ability to obtain additional financing, restructure or refinance our indebtedness, or meet our liquidity and debt service requirements.
We recently received notice from a “Vapotherm Access” technology licensor claiming our exclusive license had terminated due to our failure to use reasonable efforts to commercialize the licensed technology. Although we dispute this contention vehemently and believe the licensor has ulterior motives, termination of the license could delay the commercial launch of our home product and, if the purported termination results in litigation, could result in additional expense and management distraction, regardless of outcome.
We are successor in interest to the 2012 exclusive license agreement between Temple University and HGE Health Care Solutions LLC (“HGE”), which we acquired in 2020. Briefly summarized, the agreement exclusively licensed to HGE (and now to us) certain intellectual property designed to predict COPD exacerbations using remote patient monitoring. This licensed technology was used in the Vapotherm Access call center business which we exited in 2022 and is also incorporated in the home based device we have been actively developing at our Technology Center in Singapore. We recently completed proof of concept testing of the digital solution that supports the home device with Vapotherm Access at Temple University Medical Center. Despite our active development of a home device incorporating the technology licensed from Temple, and our ongoing collaboration with Temple Medical Center in the development of this product, we recently received a notice from Temple declaring the license terminated, allegedly due to our failure to use reasonable efforts to commercialize the licensed technology. Prior to sending the notice, and despite being party to a valid and existing exclusive license agreement, Temple had sought to enter into a new license agreement with us which would have, among other things, narrowed our exclusive field of use. We did not enter into the new license Temple proposed. In addition to declaring the existing license terminated, Temple also claimed unpaid royalties. We are analyzing this contention and believe any amounts which may be due (if any) are not material. We remain hopeful of an amicable resolution of this dispute and plan to defend our rights vigorously should this not occur. Termination of the Temple license agreement could delay the launch of our home based device and, should litigation ensue, litigation costs could have a material adverse effect on our business and financial results, regardless of outcome.
47
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the third quarter of 2023, the Company granted SLR Investment Corp. (“SLR”) warrants to purchase an aggregate of 66,990 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 had a weighted average exercise price of $2.68 per share on the date of grant, were fully vested upon issuance, are exercisable at the option of the holder, in whole or in part, and have expiration dates ranging from July 3, 2033 through September 1, 2033. 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.
48
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 INDEX
Exhibit Number |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
|
|
|
4.1 |
|
|
|
|
|
10.1 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
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 (filed herewith) |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
49
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. |
|
|
|
|
November 8, 2023 |
By: |
/s/ Joseph Army |
|
|
Joseph Army |
|
|
President and Chief Executive Officer |
November 8, 2023 |
By: |
/s/ John Landry |
|
|
John Landry |
|
|
Senior Vice President and Chief Financial Officer |
50
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.
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.
2
3
4
5
then, in connection with each such event, the Company shall give Holder:
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.
6
The Holder represents and warrants to the Company as follows:
7
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.
8
[•]
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
9
[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
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Signature Page to Warrant to Purchase Stock
“HOLDER” [•] By:_________________________________ Name: Title:
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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
Exhibit 10.1
PROTOCOLE D’ACCORD TRANSACTIONNEL |
Translation for Information Purposes Only
1
2
EN CONSEQUENCE IL EST CONVENU CE QUI SUIT : |
IT HAS THEREFORE BEEN AGREED AS FOLLOWS |
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1. |
Rupture du Contrat |
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1. |
Termination of the Contract |
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1.1 |
Le Contrat sera rompu à la Date de rupture sous réserve de l'homologation explicite ou implicite de la Dreets. |
1.1 |
The Contract will be terminated on the Termination Date provided that the French local labor authorities grant explicit or implicit approval. |
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1.2 |
Conformément aux instructions de la Société, le Salarié démissionnera sans délai de tous les mandats sociaux qu'il pourrait occuper au sein de la Société et/ou de toute autre société du groupe auquel appartient la Société (ci-après le « Groupe ») et signera tout document nécessaire pour constater cette démission. |
1.2 |
As directed by the Company, the Employee will, without delay, resign from all the corporate offices that he may hold within the Company and/or any other company of the group to which the Company belongs (hereinafter the “Group”) and sign any document necessary to record such resignation. |
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2. |
Solde de tout compte et documents de fin de contrat |
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2. |
Balance of any accounts and termination documents |
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2.1 |
Le solde de tout compte sera établi notamment sur les bases suivantes : |
2.1 |
The balance of any account shall be established, inter alia, on the following basis: |
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le salaire fixe habituel pour la période allant du 1er au 31 octobre 2023 ; |
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the usual fixed salary for the period from October 1st to 31st, 2023; |
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une indemnité compensatrice de congés payés brute correspondant aux jours acquis et non pris à la Date de Rupture ; les Parties reconnaissent, pour le calcul de ce nombre, qu’au 31 août 2023, le Salarié n’avait plus de jours de congés payés acquis et que, ayant pris par anticipation 6 jours de congés payés le solde de jours de congés payés en cours d’acquisition est égal à 0,25 jour ouvré (le Salarié ayant informé la Société de l’ensemble des jours de congés payés pris mais non encore comptabilisés). |
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an indemnity for accrued and unused paid vacation as of the Termination Date; this number will be calculated with the specific acknowledgment by the Parties that the Employee, as of August 31st, 2023, had no more vacation days accrued and that, since the Employee took 6 vacation days in advance, the balance of paid leave days being acquired is equal to 0.25 working day (the Employee having informed the Company of all his vacation days taken but not yet recorded). |
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Le Salarié a demandé à prendre par anticipation, avant la Date de Rupture, l’ensemble des jours de congés payés qu’il acquerra d’ici la Date de Rupture, soit 4,41 jours ouvrés (arrondis à 5 jours ouvrés), ce que la Société a accepté. |
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The Employee requested to take in advance, before the Termination Date, all paid vacation days he will acquire by the Termination Date, i.e. 4.41 working days (rounded up to 5 working days), which the Company accepted. |
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Ainsi, aucune somme ne lui sera due au titre des congés payés, à la Date de Rupture ; |
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Therefore, no amount will be due to him with respect to paid vacation, on the Termination Date; |
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une indemnité spécifique de rupture conventionnelle de 132.911 EUR (cent trente-deux mille neuf cent onze euros) bruts. |
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a specific contractual termination indemnity of a gross amount of EUR 132,911 (one hundred thirty-two thousand nine hundred eleven euros). |
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3
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Le Salarié reconnaît avoir été rempli de l’intégralité de ses droits en termes de rémunération, notamment variable. En particulier, le Salarié reconnaît ne pas remplir les conditions relatives à l’éligibilité au bonus correspondant aux 3ème et 4ème trimestres 2023, de sorte qu’aucune somme ne lui est due à ce titre. |
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The Employee acknowledges having been fulfilled with all of his rights in terms of remuneration, notably variable. In particular, the Employee acknowledges not meeting the conditions relating to the eligibility to the bonus corresponding to Q3 and Q4 2023, so that no sum is due to him in this respect. |
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2.2 |
Le Salarié marque son accord définitif et irrévocable sur ces éléments de solde de tout compte et reconnaît qu’aucune autre somme ne lui est due à ce titre. Il reconnaît également que la Société ne lui est redevable d’aucune somme au titre de remboursement de frais ou à quelque titre que ce soit, dont il bénéficiait dans le cadre de l’exécution de son Contrat. |
2.2 |
The Employee definitively and irrevocably agrees to this final statement of accounts and acknowledges that no other amount is due to him in this respect. He further acknowledges that the Company does not owe him any sum with respect to reimbursements of professional expenses for any reason whatsoever, to which he was entitled during the performance of his Contract. |
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2.3 |
Le Salarié reconnaît par ailleurs que les termes et conditions de la rupture n’ouvrent pas droit à l’application du Separation Pay Agreement du 24 mars 2022, de sorte qu’aucune somme ne lui est due à ce titre. |
2.3 |
The Employee further acknowledges that the terms and conditions of the termination do not entitle him to any right to the application of the Separation Pay Agreement dated March 24, 2022, so that no sum is due to him in this respect. |
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3. |
Concessions de la Société |
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3. |
Concessions of the Company |
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3.1 |
À titre de concessions, sans que cela constitue une quelconque acceptation des prétentions que le Salarié a ou pourrait avoir contre la Société, la Société procèdera au règlement d'une somme brute de 44.305 EUR (quarante-quatre mille trois cent cinq euros) à titre d'indemnité transactionnelle, forfaitaire, globale et définitive, dont seront déduites la CSG, la CRDS, les charges sociales et l’impôt y afférents. |
3.1 |
The Company, as a concessionary measure, without it being construed by any means as an acceptance of any claim the Employee has or may have against the Company, accepts to grant the Employee a gross amount equal to EUR 44,305 (forty-four thousand three hundred and five euros) as a settlement compensation, fixed, global and final, from which will be deducted the CSG/CRDS and the related social security contributions. |
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L’indemnité susvisée sera assujettie comme traitement et salaire et sera déclarée comme telle par la Société. |
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The aforementioned indemnity will be subject as salary and wages and will be declared as such by the Company. |
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3.2 |
Cette indemnité qui a pour objet de compenser le préjudice professionnel et moral subi par le Salarié du fait de l’exécution de son Contrat sera payée au Salarié par la Société dans les 60 jours suivant la signature des présentes, par virement bancaire sur le compte en banque dont elle détient le RIB. |
3.2 |
This settlement indemnity, aiming at compensating any professional and moral prejudice suffered by the Employee for the performance of his Contract will be paid to the Employee within 60 days following the signature of this agreement, by bank transfer to the bank account of which it holds the details. |
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3.3 |
Chaque Partie fera son affaire personnelle de toute conséquence sociale et/ou fiscale portant sur la somme susvisée par les présentes, pour la part qui lui incombe, sous réserve des déductions opérées à la source par la Société conformément aux pratiques habituelles de paie. |
3.3 |
Each Party will be personally liable of any social and/or tax contributions to be paid on the above amount provided in the present document for the part which it has to pay, subject to the deductions at source by the Company pursuant to usual payroll. |
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4
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4. |
Acceptation et concessions du Salarié |
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4. |
Acceptance and concessions of the Employee |
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4.1 |
En contrepartie des paiements et concessions faits par la Société en vertu des articles 2 et 3 de la présente transaction, le Salarié se déclare expressément et irrévocablement rempli de tous ses droits à l'égard de la Société ou de toute société du Groupe, attachés à la conclusion, à l’interprétation ou à l’exécution de son Contrat, ou de tout contrat ou mandat social détenu avec la Société et/ou toute autre société du Groupe, sur quelque fondement que ce soit. |
4.1 |
In return for the payments and concessions, made by the Company in virtue of articles 2 and 3 of this settlement agreement, the Employee declares that all his rights are expressly and irrevocably fulfilled, with respect to the Company or any other company of the Group, attached to the conclusion, interpretation or performance of his Contract with the Company, or any contract or office with the Company and/or any other company of the Group, on any grounds whatsoever. |
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4.2 |
Sous réserve de bonne fin d'encaissement des sommes dues au titre des articles 2 et 3, le Salarié considère que la présente transaction compense intégralement le préjudice qu'il estime avoir subi en raison de l’exécution du Contrat et plus généralement en raison tant de la conclusion que de l'exécution de son Contrat ou de tout autre contrat ou mandat social intervenu avec la Société et/ou toute autre société du Groupe. |
4.2 |
Subject to the successful payment of the amounts provided for in article 2 and article 3, the Employee agrees that this settlement agreement fully compensates him for the prejudice he believes he had suffered because of the performance of his Contract and more generally, due to both the conclusion and the performance of his Contract or any contract or corporate office with the Company and/or any other company of the Group. |
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4.3 |
En conséquence, le Salarié renonce à tous ses droits nés ou à naître à l’égard de la Société et/ou de toute autre société du Groupe, attachés à la conclusion, à l’interprétation et/ou à l’exécution de son Contrat et/ou de tout autre contrat ou mandat social intervenu avec la Société et/ou toute autre société du Groupe, sous quelque fondement que ce soit, relatifs notamment, sans que cette liste ne soit exhaustive : |
4.3 |
As a consequence, the Employee waives his rights, with respect to the Company and/or any other company of the Group, related to the conclusion, the interpretation and/or the performance of his Contract and/or any other contract or corporate office with the Company and/or any company of the Group, on any grounds whatsoever, particularly including, but not limited to: |
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tous salaires, accessoires de salaires, primes ou bonus de quelque nature qu’ils soient, avantages en nature, indemnités liées au temps de déplacement, heures supplémentaires et majorations pour heures supplémentaires, repos compensateurs, indemnités de réduction du temps de travail ou toutes autres indemnités liées à la durée du temps de travail notamment en raison de son statut de cadre dirigeant, indemnités compensatrices de congés payés, jours de repos, indemnités compensatrices de préavis, indemnité de licenciement, indemnité de départ à la retraite, remboursement de frais, clause de non-concurrence, droits au titre de la formation professionnelle, perte d’une chance de droits à retraite de base, complémentaire ou sur complémentaire, de prévoyance, mutuelle ou d’avantages de quelque nature qu’ils soient relatifs à la protection sociale ou encore dommages-intérêts échus ou à échoir au titre de tout rapport de droit ou de faits ayant existé entre lui, la Société, ainsi que toute société du Groupe, et |
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all wages, salary incidentals, premiums or bonuses of any kind, benefits in kind, travel indemnity, overtime payment and increases for overtime, time off in lieu of overtime, indemnities related to the reduction in working time or any other indemnity related to working time especially given the Employee’s senior executive status, compensation in lieu of paid holiday, rest days, notice period indemnity, severance payment, retirement benefits, reimbursement of expenses, non-compete provision, compensation with respect to a non-compete provision, rights regarding occupational training, loss of opportunity on rights to a basic, complementary or supplementary retirement pension, welfare, health insurance or benefits of any kind related to social welfare or damages due and becoming due by virtue of any legal relationship or facts having occurred between him, the Company and/or any company of the Group, and more generally with regard to the signing, interpretation and/or performance of his Contract and/or any other |
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5
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plus généralement, au titre de la conclusion, de l’interprétation et/ou de l’exécution de son Contrat ou de tout autre contrat ou mandat social qui serait intervenu avec la Société ainsi que toute société du Groupe, le montant de l’indemnité transactionnelle couvrant l’ensemble des préjudices prétendument subis par lui, y compris mais sans que cela soit limité aux prétentions en lien avec le litige rappelé plus haut. |
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contract or corporate office which would have existed between him, the Company and/or any company of the Group, with the amount of the settlement indemnity covering all damages allegedly suffered by him, including but not limited to the claims related to the dispute indicated above. |
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4.4 |
Il renonce consécutivement définitivement et irrévocablement à l’exercice de toute action devant quelque juridiction que ce soit contre la Société et les autres sociétés du Groupe, de même qu’à saisir toute administration, notamment du travail ou de la sécurité sociale, concernant des rapports de droit ou de faits ayant pu exister entre lui et la Société, ainsi que toute autre société du Groupe. |
4.4 |
He therefore renounces definitively and irrevocably to any proceedings before any kind of jurisdiction against the Company and/or the companies of the Group, as well as to file a claim before any administration, notably regarding employment or social security matters, regarding legal or factual relationships between him and the Company, as well as any other company of the Group. |
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4.5 |
Le Salarié s’interdit toute poursuite contre les salariés et représentants de la Société ainsi que de toute société du Groupe et s’opposera à toute action en justice d’une organisation syndicale exercée en sa faveur. |
4.5 |
The Employee renounces to any claim against employees and representatives of the Company as well as any company of the Group and will object to any judicial proceeding initiated by a trade union in his favor. |
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4.6 |
Conformément aux termes du Contrat, le Salarié déclare avoir conservé, au cours de l'exécution de son Contrat et conservera, postérieurement à la rupture de celui-ci, pour une durée indéterminée, confidentielles toutes Informations Confidentielles (c’est-à-dire celles qui ne seraient pas devenues publiques, notamment celles concernant la situation économique et financière de la Société et du Groupe, ses actions de vente, marketing et de publicité, ses secrets commerciaux, ses processus confidentiels, techniques, secrets de fabrique, savoir-faire, brevets, marques, méthodes, systèmes, capacités opérationnelles, logiciels, matériel informatique, ses activités de recherche, développement, création, création de logiciel, ses inventions, appareils, découvertes, concepts, idées, formules, ainsi que toute amélioration ou modifications de ceux-ci, ses listes de clients) dont il a pu avoir connaissance par quelque moyen et à quelque moment que ce soit – que ce soit dans le cadre de son Contrat ou de tout autre contrat ou mandat au sein de la Société ou du Groupe - et concernant la Société, ou toute société du Groupe, leurs activités ainsi que concernant leurs clients, mandataires sociaux et salariés ou anciens salariés ou actionnaires. Le Salarié ne devra pas, pour une durée indéterminée, directement ou indirectement faire usage ou permettre à un tiers de faire usage d’Informations Confidentielles concernant la Société, les sociétés du Groupe ainsi que leurs clients et fournisseurs. |
4.6 |
Pursuant to the terms of his Contract, the Employee pledges that he kept, during the performance of his Contract and will keep confidential after its termination, for an indefinite period, any Confidential Information (i.e. the ones which have not been accessible to the public, including those relating to the economic and financial position of the Company and its group, its sales, marketing and advertising actions, its business secrets, its confidential, technical processes, its manufacturing secrets, know how, patents, brands, methods, systems, operational capabilities, software, hardware, its research and development work, its creation work, software development, its inventions, machines, discoveries, concepts, ideas, formulas, as well as any improvement thereof or change therein, clients lists) of which he might have had / may have knowledge of by any means and at any time - within the frame of his Contract or any other contract or mandate within the Company or the group to which the Company belongs - and that concerns the Company, or any company of the Group, their activities, their clients, corporate officers and employees or ex-employees or shareholders. The Employee shall not use, for an indefinite period, directly or indirectly, or allow a third party to use, any Confidential Information concerning the Company, the companies of the Group as well as their clients and suppliers. |
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6
4.7 |
En conséquence, il ne devra ni solliciter ni répondre à aucune sollicitation pouvant conduire à la transmission de telles informations ou de recommandations, notamment dans le cadre d’actions judiciaires, sauf en cas de requête policière ou judiciaire. |
4.7 |
As a consequence, he will not request or answer to any solicitation which could lead to the transmission of such information or recommendation, especially during legal proceedings unless he is subpoenaed to. |
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4.8 |
Le Salarié ne conseillera pas les salariés ou anciens salariés de la Société, ni n’interférera en aucune façon dans les relations sociales de la Société ou de toute autre société appartenant au même Groupe, ou en cas d’éventuelles contestations et/ou actions qu’ils pourraient mener à l’encontre de la Société ou du Groupe. |
4.8 |
The Employee will not advise the current or former employees of the Company, nor interfere in any manner whatsoever with the social relationships of the Company or, any company of the Group, including in case of potential disputes and/or measures that they could take against the Company or the Group. |
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4.9 |
Le Salarié n’aura aucun propos visant à critiquer de quelque manière que ce soit ou à dénigrer directement ou indirectement, ou à nuire directement ou indirectement aux intérêts de la Société, du Groupe ainsi que ses salariés et dirigeants, ainsi qu’à leur image et à leur réputation professionnelle. |
4.9 |
The Employee shall not make any statement that is intended to criticize in any way whatsoever or to denigrate, directly or indirectly, or to harm, directly or indirectly, the interests of the Company, the Group and its employees and managers, as well as their image and professional reputation. |
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4.10 |
Au terme de son Contrat, le Salarié reconnaît devoir restituer à la Société tous biens, pièces et documents (ainsi que leurs copies), objets et équipements en rapport avec la Société et/ou utilisés dans l’exercice de ses fonctions. Il s’interdit de conserver, notamment sous forme de copie papier ou électronique, tout document et toute donnée, en particulier à caractère personnel ou couverte par le secret des affaires, appartenant à la Société ou l’une quelconque des sociétés du Groupe. |
4.10 |
At the end of the Contract, the Employee acknowledges that he shall return to the Company all property, parts and documents (and copies thereof), objects and equipment relating to the Company and/or used in the performance of his duties. The Employee shall refrain from keeping, in particular in the form of paper or electronic copies, any document and any data, in particular of a personal nature or covered by business secrecy, belonging to the Company or any of the companies in the Group. |
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5. |
Equity |
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5. |
Equity |
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5.1 |
Les Parties reconnaissent que le Salarié conservera ses actions vestées à la Date de Rupture conformément aux termes du Vapotherm 2018 Equity Plan. Il perdra l’ensemble des droits relatifs aux actions non-vestées. |
5.1 |
The Parties acknowledge that the Employee will keep his vested shares on the Termination Date pursuant to the terms of the Vapotherm 2018 Equity Plan. He will lose all his non-vested rights to equity shares. |
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5.2 |
Le Salarié renonce à toute contestation relative à l’exercice des droits sur les actions qu’il s’est vu attribuer et qui n’auraient pas été vestées à la Date de Rupture. |
5.2 |
The Employee renounces to any claim related to any equity rights granted to him and which would not have vested on the Termination Date. |
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7
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7.3. |
Les Parties reconnaissent que la présente transaction devra rester confidentielle et que sa teneur ou une copie ne pourra être communiquée à des tiers par une des Parties qu'avec l'accord exprès écrit préalable de l'autre Partie, à l'exception de toute communication exigée par la loi ou par toute autorité administrative (en particulier par les administrations du travail ou les administrations fiscales) dans le cadre de son application. En revanche, les Parties peuvent produire les présentes en justice en vue d'obtenir leur exécution par la partie défaillante. Dans l’éventualité où l’une des Parties serait contrainte de produire la présente transaction, elle devra promptement en informer l’autre partie par lettre recommandée avec demande d’avis de réception. |
7.3. |
The Parties acknowledge that this agreement must remain confidential, as well as its provisions, and copy cannot be communicated to third Parties by any of the Parties without the express written prior consent of the other party, except for any communication required by law or any other administrative authority (in particular, by the labor or tax authorities) in relation to its enforcement. However, the Parties may always present this document before a court in order to obtain its enforcement by the defaulting party. In the event that one of the Parties is obliged to produce the present agreement, it shall promptly inform the other Party by registered letter with acknowledgement of receipt. |
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7.4. |
Les Parties respecteront le caractère confidentiel des conditions de la rupture du Contrat et de la présente transaction, et s’engagent à ne pas dire ou faire quoi que ce soit qui puisse nuire à l'autre partie. Le Salarié s’abstiendra notamment de perturber les relations sociales au sein de la Société ou d’interférer dans les relations que la Société pourrait notamment avoir avec ses salariés, ses représentants du personnel, ou l’administration. |
7.4. |
The Parties shall irrevocably respect the confidential character of the conditions under which the Contract was terminated, as well as the terms and provisions of the present agreement, and not to reveal or behave in any manner which might harm the other Party. The Employee will not disrupt social relationships within the Company or interfere with the relationships the Company may have with its employees, staff representatives or the French Labor authorities. |
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7.5. |
Tous conflits ou dettes pouvant exister entre les Parties du fait de la conclusion, de l’interprétation ou de l'exécution du Contrat ou de tout autre contrat ou mandat social qui pourrait être intervenu entre le Salarié et la Société ou toute société du groupe auquel appartient la Société sont définitivement réglés par les présentes, sans exception ou réserve. Les Parties renoncent réciproquement à toute réclamation ou action au titre de l’exécution du Contrat. |
7.5. |
All disputes or debts that may exist between the Parties, due to the conclusion, interpretation and performance of the Contract or of any other contract or corporate office that may have been entered into by the Employee and the Company or any company of the group owning the Company, are hereby settled, without any exception or reservation. The Parties reciprocally waive any claim or action with respect to the performance of the Contract. |
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7.6. |
Les sommes versées relèveront du régime fiscal et social applicable aux salaires. |
7.6. |
The sums paid will be subject to the tax and social security regime applicable to wages. |
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7.7. |
Le Salarié reconnaît être informé du fait que la perception des sommes visées à la présente transaction est susceptible d’entrainer l’application d’un différé d’indemnisation au titre de l’assurance chômage et déclare n’avoir aucune contestation à cet égard. Le Salarié déclare ainsi expressément qu’il fera son affaire personnelle de toutes déclarations des sommes qui lui ont été versées. Par ailleurs, le Salarié sera responsable du paiement de toutes taxes et cotisations de nature salariale (de sécurité sociale ou assimilées si applicable), dont il pourrait être redevable du fait des paiements mentionnés dans la présente transaction, à l’exclusion de ceux retenus à la source par la Société. |
7.7. |
Similarly, the Employee acknowledges to be fully informed of the fact that the payment of the sums described in this settlement agreement may entail a differed payment of unemployment allowances. The Employee thus expressly declares that he will be personally responsible for all declarations of the sums that were paid to him. Besides, the Employee shall be liable for the payment of any taxes and contributions of a salary nature (social security or assimilated where applicable), to which he might personally be subject due to the payment mentioned in this agreement, excluding those withholding taxes paid by the Company. |
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La Société se réserve le droit d’en demander le paiement au Salarié, et ce dernier accepte d’y répondre à première demande. |
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The Company reserves the right to ask the Employee for the payment of these contributions and the latter accepts to respond to the first request. |
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7.8. |
Cet accord est conclu sous la condition résolutoire de l’homologation de la rupture conventionnelle par l’administration avant le 31 octobre 2023 et de sa validité. En l’absence d’homologation ou en cas de nullité de la rupture conventionnelle, le présent accord serait nul et non avenu. |
7.8. |
This settlement agreement is entered into under the resolutory condition of the approval of the amicable termination by the labor administration before October 31st, 2023 and its validity. In the absence of such approval or in case of nullity of the amicable termination, the present settlement agreement would be null and void. |
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7.9. |
La présente transaction constitue un tout indivisible, de telle sorte que nul ne pourra se prévaloir d’une stipulation isolée. En cas de divergence entre la version française et la version anglaise, la version française fera foi. |
7.9. |
This settlement agreement constitutes a global and indivisible agreement. Consequently, it is not possible to rely on a provision by itself. In case there is a difference between the French and English version, the French version will prevail. |
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7.10. |
Cet accord transactionnel constitue une transaction forfaitaire, globale et définitive emportant règlement de toutes sommes dues et auquel les Parties conviennent d'attribuer, de manière irrévocable, les effets de la transaction conformément aux dispositions du Code civil et notamment celles des articles 2044 et suivants et, en particulier, de l'article 2052 de ce même code. |
7.10. |
This settlement agreement constitutes a lump-sum, global and definitive settlement agreement involving the payment of all sums due and to which the Parties agree to attribute, in an irrevocable manner, the effects of the settlement agreement in accordance with the provisions of the Civil Code and in particular those of articles 2044 et seq. and, in particular, article 2052 of the same code. |
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Etabli en deux (2) exemplaires originaux dont l’un remis à chaque partie, |
In two (2) original copies, one of which was given to each party, |
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Le 26 septembre 2023 |
On September 26, 2023 |
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/s/ Joseph F. Army |
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/s/ Grégoire Ramade |
Por Vapotherm |
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M. Grégoire Ramade (*) |
M. Joseph F. Army |
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(*) "Read and approved, accepted as a final and irrevocable settlement in accordance with articles 2044 and following of the civil code, withdrawal of proceedings and action, and waiver of all appeals, challenges, proceedings or actions".
10
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:
/s/ JOSEPH ARMY |
Joseph Army |
President and Chief Executive Officer |
(Principal Executive Officer) |
Date: November 8, 2023
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:
/s/ JOHN LANDRY |
John Landry |
Senior Vice President and Chief Financial Officer |
(Principal Financial Officer) |
Date: November 8, 2023
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 September 30, 2023 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: November 8, 2023 |
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 September 30, 2023 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: November 8, 2023 |