美國
證券交易委員會
華盛頓特區 20549
表格
根據1934年證券交易法第13或15(d)條的季度報告 |
截至2024年6月30日季度結束
或
根據1934年證券交換法第13和第15(d)條的過渡報告 或 1934年證券交換法第15(d)條 |
從___到___的過渡期間
委員會文件號碼：
(正式註冊人的確切名稱，如章程所規定)
(成立州或其他管轄區) | 編號) |
(總部地址) (郵政編碼)
(
(註冊人電話號碼，包括區號)
根據該法案第12(b)條規定註冊的證券：
每個班級的標題 |
| 交易符號 | 每個交易所的名稱在登記？ |
|---|---|---|---|
那個 |
請在核選記號區域表明：（1）本登記申請人在過去12個月（或申請人需要提交此項申報的較短期間）內已提交證券交易所法案第13條或第15(d)條要求提交的所有報告，且（2）本申請人在過去90日內已遵守上述提交要求。
請在勾選符號上註明，是否在過去的12個月內（或更短的時間內，如果註冊人需提交此類文件），根據Regulation S-t第405條規定向本章第232.405條提交所需提交的每個交互式資料檔案。
請勾選相應的選項，表明公司是否屬於大型快速申報人、快速申報人、非快速申報人、小型報告公司或新興成長型公司。請參見交易所法案第1202條中“大型快速申報人”、“快速申報人”、“小型報告公司”和“新興成長型公司”的定義。
大型高速申報者 | ☐ | 快速文件提交者 | ☐ |
☒ | 小型報告公司 | ||
新興成長公司 |
如果是新興成長公司，請勾選，以表示據第13(a)條《交易所法》規定提供的有新修訂的財務會計標准的遵守，已選擇不使用擴展過渡期。☐
在核准書上打勾表示公司是否為殼公司（如交易所法規定的第1202條所定義）。 是
截至2024年11月12日，
第一部分 - 基本報表
項目1。基本報表合併財務報表 （未經審核）
reshape lifesciences inc
簡明合併資產負債表
(未經查核)
(以千美元計，在每股金額方面)
九月三十日， | 十二月三十一日， | |||||
| 2024 |
| 2023 | |||
資產 | ||||||
流動資產: | ||||||
現金及現金等價物 | $ | |
| $ | | |
受限現金 | | | ||||
應收款項及其他應收款(採用損壞應收款項抵減後的淨額為$ |
| |
|
| | |
存貨 |
| |
|
| | |
預付費用及其他流動資產 |
| |
|
| | |
流動資產總額 |
| |
|
| | |
不動產及設備，淨額 |
| |
|
| | |
營運租賃使用權資產 | | | ||||
遞延稅資產，淨額 | | | ||||
其他資產 |
| |
|
| | |
總資產 | $ | |
| $ | | |
負債及股東權益 | ||||||
流動負債： | ||||||
應付帳款 | $ | |
| $ | | |
應計利益及其他負債 |
| |
|
| | |
保修責任，流動 | | | ||||
營運租賃負債，流動 | | | ||||
流動負債總額 |
| |
|
| | |
營業租賃負債，非流動 | | | ||||
普通股期權負債 | | | ||||
總負債 | |
| | |||
合同和應付之可能負債（註10） | ||||||
股東權益： | ||||||
優先股，面額; 授權 | ||||||
C系列可換股優先股，已授權； | ||||||
0.01 |
| — |
|
| — | |
資本公積額額外增資 |
| |
|
| | |
累積虧損 |
| ( |
|
| ( | |
累積其他全面損失 | ( | ( | ||||
股東權益總額 |
| |
|
| | |
負債和股東權益總額 | $ | |
| $ | | |
請參閱附錄的簡明綜合財務報表附註。
3
reshape lifesciences inc.
損益綜合表簡明合併報表
(未經審計)
(以千美元計，在每股金額方面)
截至9月30日的三個月 | 截至九月三十日結束的九個月 | ||||||||||||||
2024 | 2023 |
| 2024 | 2023 | |||||||||||
營業收入 | $ | | $ | | $ | | $ | | |||||||
成本收入 | |
| |
| |
| | ||||||||
毛利 | |
| |
| |
| | ||||||||
營運費用： | |||||||||||||||
銷售和市場推廣 | |
| |
| |
| | ||||||||
一般及行政費用 | | | | | |||||||||||
研發 | |
| |
| |
| | ||||||||
长期资产减值 | — | | — | | |||||||||||
資產出售的收益，淨 | — | — | — | ( | |||||||||||
營業費用總額 | |
| |
| |
| | ||||||||
營運虧損 | ( |
| ( |
| ( |
| ( | ||||||||
其他費用（收入），淨值： | |||||||||||||||
利息收益，淨額 | — | ( | ( | ( | |||||||||||
負債認股權憑證公平價值變動收益 | ( | ( | ( | ( | |||||||||||
償還債務所得的收益 | — | — | ( | — | |||||||||||
外幣兌換損益，淨額 | ( | | ( | | |||||||||||
其他 | ( | — | ( | ( | |||||||||||
稅前淨虧損 | ( | ( | ( | ( | |||||||||||
所得稅開支 | | | | | |||||||||||
淨損失 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||
每股淨虧損 - 基本及稀釋： | |||||||||||||||
基本和稀釋每股淨虧損 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||
用於計算基本和稀釋每股淨虧損的股份 | |
| |
| |
| | ||||||||
請參閱簡明綜合財務報表附註。
4
5
reshape lifesciences inc
股東權益簡明合併報表
(未經查核)
（以千美元計）
2024年9月30日止三個月 | ||||||||||||||||||||||
C 系列可轉債券 | 額外 | 其他累計 | 總計 | |||||||||||||||||||
優先股 | 普通股 | 實收資本 | 累計 | 綜合 | 股東的 | |||||||||||||||||
| 股份 |
| 金額 |
| 股份 |
| 金額 |
| 資本 |
| 虧損 |
| 損失 |
| 權益 | |||||||
2024年6月30日結餘 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
淨損失 | — | — | — | — | — | ( | — | ( | ||||||||||||||
其他綜合收益，扣除稅項後 | — | — | — | — | — | — | | | ||||||||||||||
依乎逆向股票分割發行普通股股份 | — | — | | — | — | — | — | — | ||||||||||||||
股票報酬 | — | — | — | — | | — | — | | ||||||||||||||
RSUs發行股票 | — | — | | — | — | — | — | — | ||||||||||||||
2024年9月30日結餘 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
2024年9月30日結束的九個月 | ||||||||||||||||||||||
C輪可換股債券 | 其他 | 累計其他 | 總計 | |||||||||||||||||||
優先股 | 普通股 | 實收資本 | 累計 | 綜合 | 股東的 | |||||||||||||||||
| 股份 |
| 金額 |
| 股份 |
| 金額 |
| 資本 |
| 虧損 |
| 損失 |
| 權益 | |||||||
2023年12月31日結餘 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
淨損失 | — | — | — | — | — | ( | — | ( | ||||||||||||||
根據逆向股票拆分發行普通股 | — | — | | — | — | — | — | — | ||||||||||||||
股票報酬 | — | — | — | — | | — | — | | ||||||||||||||
從限制性股票贈與單位發行股票 | — | — | | — | — | — | — | — | ||||||||||||||
認購權證的行使 | — | — | | — | | — | — | | ||||||||||||||
2024年9月30日結餘 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
見附帶的基本報表附註。
6
reshape lifesciences inc
簡縮合併股東權益報表（續）
(未經查核)
（以千美元計）
2023年9月30日結束的三個月 | ||||||||||||||||||||||
C系列可轉換債券 | 額外 | 累計 | 總計 | |||||||||||||||||||
優先股 | 普通股 | 實收資本 | 累積 | 綜合 | 股東的 | |||||||||||||||||
股份 |
| 金額 |
| 股份 |
| 金額 |
| 資本 |
| 虧損 | 收益（損失） |
| 權益 | |||||||||
2023年6月30日結餘 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
淨損失 | — | — | — | — | — | ( | — | ( | ||||||||||||||
其他綜合收益，扣除稅項後 | — | — | — | — | — | — | | | ||||||||||||||
股票報酬 | — | — | — | — | | — | — | | ||||||||||||||
股權發行成本 | — | — | — | — | ( | — | — | ( | ||||||||||||||
從RSU發行股票 | — | — | | — | — | — | — | — | ||||||||||||||
截至2023年9月30日的餘額 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
2023年9月30日止九個月 | ||||||||||||||||||||||
C輪可轉換 | 其他 | 其他累計 | 總計 | |||||||||||||||||||
優先股 | 普通股 | 實收資本 | 累計 | 綜合 | 股東的 | |||||||||||||||||
股份 |
| 金額 |
| 股票 |
| 金額 |
| 資本 |
| 虧損 | 損失 |
| 權益 | |||||||||
2023年12月31日的餘額 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
淨損失 | — | — | — | — | — | ( | — | ( | ||||||||||||||
其他綜合收益，扣除稅項後 | — | — | — | — | — | — | ( | ( | ||||||||||||||
根據反向股票拆分發行普通股 | — | — | | — | — | — | — | — | ||||||||||||||
股票報酬 | — | — | — | — | | — | — | | ||||||||||||||
購買普通股 | — | — | | — | | — | — | | ||||||||||||||
股權發行成本 | — | — | — | — | ( | — | — | ( | ||||||||||||||
透過限制性股票單位(RSU)發行股票 | — | — | | — | — | — | — | — | ||||||||||||||
認購權證的行使 | — | — | | — | | — | — | | ||||||||||||||
截止至2023年9月30日的餘額 | | $ | — | | $ | — | $ | | $ | ( | $ | ( | $ | | ||||||||
見附帶的基本報表附註。
7
RESHAPE LIFESCIENCES INC.
簡明的綜合現金流量表
(未經審計)
(以千美元爲單位)
九個月截至9月30日 | ||||||
2024 | 2023 | |||||
經營活動現金流量： |
| |||||
淨虧損 | $ | ( | $ | ( | ||
調整爲淨損失到經營活動現金流量淨使用： | ||||||
折舊費用 |
| |
| | ||
無形資產攤銷 | — | | ||||
長期資產減值 | — | | ||||
償還債務所獲利潤 | ( | — | ||||
資產出售收益，淨額 | — | ( | ||||
基於股票的補償 | | | ||||
壞賬費用 | | | ||||
庫存超額和過時的準備 | | | ||||
遞延所得稅 | — | | ||||
負債warrants公允價值變動收益 | ( | ( | ||||
發行成本 | — | | ||||
其他非現金項目 | | | ||||
經營性資產和負債的變化： |
|
| ||||
應收賬款及其他應收款項 |
| |
| ( | ||
存貨 |
| |
| | ||
預付費用及其他流動資產 |
| |
| ( | ||
應付賬款及應計負債 | | ( | ||||
融資擔保責任 |
| — |
| ( | ||
其他 |
| — |
| | ||
用於經營活動的淨現金 | ( | ( | ||||
投資活動現金流量： | ||||||
資本支出 | — | ( | ||||
出售資本資產收入 | — | | ||||
投資活動產生的現金流量： | — | ( | ||||
融資活動的現金流： | ||||||
證券的出售和發行所得收入 | — | | ||||
執行期權 | | — | ||||
股權發行成本支付 | — | ( | ||||
融資活動提供的淨現金 | | | ||||
匯率變動對現金及現金等價物的影響 |
| — |
| ( | ||
經營性現金流淨額 |
| ( |
| ( | ||
期初現金、現金等價物及受限制的現金餘額 | | | ||||
期末現金、現金等價物和受限制現金 | $ | | $ | | ||
補充披露： | ||||||
支付的所得稅費用 | $ | | $ | | ||
跨貨幣利率互換資產
8
ReShape Lifesciences公司
附註至簡明合併財務報表
（以千美元計，每股金額除外；未經審計）
（1）報告基礎
Reshape Lifesciences Inc. (以下簡稱「公司」或「ReShape」) 的附屬中期簡明合併基本報表和相關披露已根據證券交易委員會（「SEC」）的規則和法規編制，應與2023年12月31日終了的公司第10-k表格年度報告中包含的合併基本報表和附註一起閱讀，該報告於2024年4月1日提交。根據美國通用會計準則（「GAAP」）編制的基本報表通常包括的某些信息和腳註披露已經被壓縮或省略。
在管理層看法中，附屬的中期簡明合併基本報表反映出爲公允陳述中期期間所需的所有必要調整。所有這些調整均爲正常、連續性質。中期期間的運營結果不一定代表整年的預期運營結果。
股票拆分
2024年9月23日，在交易開始時，該公司進行了一次-對-58的股票合併。因此，所呈現的附屬合併基本報表和附註中所有的股份和每股金額均已根據需要進行了回顧性調整，以反映股票合併。並未因這次股票合併發行碎股。 因此，所呈現的附屬合併基本報表和附註中所有的股份和每股金額均已根據需要進行了回顧性調整，以反映股票合併。並未因這次股票合併發行碎股。
重要會計政策摘要
公司的重要會計政策在截至2023年12月31日的審計合併財務報表註釋2中描述，該報表包括於2024年4月1日提交給美國證券交易委員會（SEC）的公司2023年度10-K表格中。
使用估計
根據GAAP編制財務報表需要管理層進行估計和判斷，從而影響資產和負債的報告金額以及在財務報表日期的確認資產和負債的披露，以及報告週期內的收入和費用的金額。公司的估計基於歷史經驗和各種其他假設，認爲在相應情況下是合理的。實際結果可能與這些估計有重大不同。公司在持續基礎上或在新信息可用時審查其估計，以確保這些估計恰當地反映業務的變化。
9
存貨
公司以成本或淨實現價值中的較低者來覈算庫存，其中淨實現價值是基於市場價格減去銷售成本。公司根據對過期或不可用單位的具體識別，建立存貨陳舊損失準備金，並在營業收入成本中包含相應的撥備。
長期資產
我們評估長期資產的潛在減值，主要是物業和設備，每當事件或情況變化表明資產組的賬面價值可能無法完全收回時。如果任何資產組存在減值指標，則對每個資產組主要資產的未貼現未來現金流的估計與該長期資產組的賬面價值進行比較。如果資產組的賬面價值大於估計的未貼現未來現金流，公司將確定資產的公允價值，如果某項資產被確定爲減值，則減值損失是通過資產的賬面金額與其公允價值之間的差額來衡量的。
金融工具的公允價值
現金等價物、應收款、應付款及某些應計和其他負債的賬面金額由於其短期到期與公允價值相近。有關warrants的公允價值測量和輸入，請參見注釋6。
每股淨虧損
下表列出了截至每個報告期末未計入稀釋每股淨虧損計算的潛在普通股，因爲這樣做將會產生反稀釋的效應：
九月30日 | ||||
| 2024 |
| 2023 | |
股票期權 |
| |
| |
未獲授限制性股票單位 | | | ||
可轉換優先股 | | | ||
認購權證 |
| |
| |
最近的會計聲明
尚未採納的新會計準則將在下文中討論。
2024年11月，財務會計標準委員會（"FASB"）發佈了會計準則更新（"ASU"）2024-03， 收入報表報告綜合收益費用分解披露（子主題220-40）：收入報表費用的分解該標準要求公司在其收入報表中提供更詳細和有組織的費用披露。該標準要求將費用分解爲特定類別，例如員工薪酬及與折舊和攤銷相關的成本。該修訂自2026年12月15日後開始的年度報告期間生效，並且自2027年12月15日後開始的中期報告期間生效，採用前瞻性方法，允許提前採用和追溯應用。公司目前正在評估這一新指南及其對合並基本報表和相關披露的影響。
2023年12月，FASB發佈了ASU 2023-09，所得稅（話題740）改善所得稅披露，該要求實體在稅率調節和關於已支付所得稅的額外分解披露中提供更多信息。該指南要求公共實體在其稅率調節表中披露關於聯邦、州和外國所得稅的額外信息類別，並在某些類別中，如果項目符合量化閾值，則提供關於調節項目的更多詳細信息。該指南自2024年12月15日後開始的年度期間生效。公司預計採用該指南不會影響其合併基本報表，但該指南將影響其所得稅披露。
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2023年11月，FASB發佈了ASU 2023-07，分部報告（話題280）對可報告部門的披露進行改進。修訂要求披露重要的部門費用和其他部門項目，並要求實體在中期內提供關於可報告部門利潤或虧損及資產的所有披露，這些要求目前是年度披露。修訂還要求披露首席運營決策者（「CODM」）的職務名稱及其職位，並解釋CODM如何在評估部門績效和決定如何分配資源時使用報告的部門利潤或虧損指標。該指南自2023年12月15日之後開始的財政年度生效，並適用於2024年12月15日之後開始的財政年度中的中期。要求進行追溯適用，允許提前採用。公司目前正在評估該指南對其合併基本報表的影響。
(2) 流動性和管理層計劃
公司目前的營業收入不足以抵消運營成本，並預計這種短缺將繼續，因爲公司已將其策略調整爲通過可持續且可擴展的業務模式採取以指標爲驅動的方法，通過數字潛在客戶生成和再參與策略。截止到2024年9月30日，公司淨營運資本約爲$
公司的預期運營包括計劃(i)與Vyome Therapeutics, Inc合併並將某些資產出售給Biorad，後者將繼續運營，(ii) 在國內和國際上增長公司與Lap-Band產品線的銷售和運營，並獲取成本節約協同效應，(iii) 向市場推出Lap-Band 2.0 FLEX，(iv) 繼續開發糖尿病塊刺激神經調節（「DBSN」）設備，以及(v) 在此合併和出售之前，探索並利用協同機會來擴展我們的產品組合，並提供未來的微創治療和療法，專注於肥胖護理的連續性。公司認爲它有靈活性來管理支出和運營的增長，這取決於可用現金流的多少，其中可能包括減少市場營銷和產品開發活動的支出。
無法保證公司將完成計劃中的交易，或者額外融資是否會在公司可接受的條款下可用。如果在需要時無法獲得足夠的基金且條款可接受，這將對公司的財務控件產生負面影響，並可能迫使公司推遲、限制、減少或終止產品開發或未來的商業化努力，或者授予開發和營銷產品候選人或測試產品的權利，而這些是公司本來計劃開發的。
因此，計劃不能被認爲是可以實施的。因此，公司的計劃並未消除我們能夠繼續作爲持續經營企業的重大疑慮。
財務報表是按照持續經營的原則編制的，預計資產能夠實現並支付債務。財務報表不包括與記錄的資產金額的恢復和分類有關的任何調整，也不包括由於上述不確定性結果而導致的負債金額和分類數量的調整。
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(3) 補充資產負債表信息
合併資產負債表中選定項目的元件包括以下內容：
庫存：
九月30日 | 2023年12月31日, | |||||
2024 |
| 2023 | ||||
原材料 | $ | | $ | | ||
子裝配 | | | ||||
成品 |
| |
| | ||
19,782 | $ | | $ | | ||
預付費用和其他流動資產：
九月30日 | 2023年12月31日, | |||||
2024 |
| 2023 | ||||
預付保險費 | $ | | $ | | ||
專業服務 | | — | ||||
專利 | | | ||||
預付廣告和營銷 | | | ||||
稅收 | | | ||||
其他流動資產 | | | ||||
預付款和其他流動資產總計 | $ | | $ | | ||
應計及其他負債：
九月30日 | 2023年12月31日, | |||||
2024 |
| 2023 | ||||
工資和福利 | $ | | $ | | ||
應計法律和解 | — | | ||||
客戶存款 | | | ||||
稅收 | | | ||||
累計的專業服務 | | | ||||
其他負債 |
| |
| | ||
已計應付及其他負債總額 | $ | | $ | | ||
應付賬款：
在2024年第二季度，管理層請求外部法律顧問就2020年及之前的各項應付賬款提供指導。根據對這些供應商所在各州的訴訟時效的審查，法律顧問對對應各州的法律是否規定訴訟時效已過提供了結論。訴訟時效是一種肯定的抗辯，辯方提供證據，如果被認爲是可信的，將否定刑事或民事責任，即使證明辯方確實進行了所指控的行爲。提出肯定抗辯的當事方有責任證明其適用。在債權人要求以書面文書證明的債務付款的民事訴訟中，成功主張訴訟時效抗辯將阻止債務的收回。爲了主張訴訟時效作爲抗辯，辯方必須在答辯中明確提出抗辯。如果辯方未能明確提出抗辯，則視爲放棄。由於在2024年9月30日之前沒有提出強制執行此類責任的訴訟，我們認爲根據各州法律，這項責任已因時間原因而被禁止追索，應當從公司的資產負債表中刪除。
因此，公司決定註銷總計$的應付款項
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(4) Leases
The Company had a noncancelable operating lease for office and warehouse space in San Clemente, which expired June 30, 2023. On March 13, 2023, the Company entered into a lease for approximately
The Company does not have any short-term leases or financing lease arrangements. Lease and non-lease components are accounted for separately.
Operating lease costs were $
Supplemental information related to operating leases is as follows:
September 30, | December 31, | |||||
Balance Sheet information | 2024 | 2023 | ||||
Operating lease ROU assets | $ | | $ | | ||
Operating lease liabilities, current portion | $ | | $ | | ||
Operating lease liabilities, long-term portion | | | ||||
Total operating lease liabilities | $ | | $ | | ||
Cash flow information for the nine months ended September 30, | 2024 | 2023 | ||||
Cash paid for amounts included in the measurement of operating leases liabilities | $ | | $ | | ||
Maturities of operating lease liabilities were as follows as of September 30, 2024:
2024 (balance of year) | $ | | ||
2025 | | |||
2026 | | |||
Total lease payments | | |||
Less: imputed interest | | |||
Total lease liabilities | $ | | ||
Weighted-average remaining lease term at end of period (in years) | ||||
Weighted-average discount rate at end of period | % |
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(5) Equity
Common Stock Issued Related to Restricted Stock Units
During the three months ended September 30, 2024 and 2023, the Company issued
May 2024 Exercise of Warrants for Common Stock
On May 30, 2024, an accredited investor exercised outstanding warrants, of which
June 2024 Exercise of Warrants for Common Stock
On June 4, 2024, the Company issued
February 2023 Public Offering of Common Stock and Warrants
On February 8, 2023, the Company closed a public offering of
Net proceeds, after deducting underwriting discounts and commissions and estimated offering expenses, were approximately $
The Company also granted the underwriters an option to purchase an additional
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(6) Warrants
The Company’s grants of warrants to purchase common stock are primarily in connection with equity financing. See Note 5 for additional information about equity financings and the related issuance of warrants. Warrant activity for the nine months ended September 30, 2024 is as follows:
| |||
Shares | |||
Balance December 31, 2023 | | ||
Issued | — | ||
Exercised | ( |
| |
Cancelled | ( |
| |
Balance September 30, 2024 | |
On February 8, 2023, the Company completed a public offering in which
Below is a summary of the initial inputs used in the bifurcated Black-Scholes option pricing model.
Cash Exercise | Cashless Exercise | |||||
Stock Price | $ | $ | ||||
Exercise Price | $ | $ | ||||
Term (years) | ||||||
Volatility | ||||||
Risk Free Rate | ||||||
Dividend Yield | ||||||
The following table presents the changes in the fair value of warrant liabilities:
Common Stock | |||
Purchase Warrants | |||
Fair value as of December 31, 2023 | $ | | |
Gain on changes in fair value of liability warrants | ( | ||
Fair value as of September 30, 2024 | $ | | |
In addition,
As part of the terms of the offering, the Company issued
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(7) Revenue Disaggregation and Operating Segments
The Company conducts operations worldwide and has sales in the following regions: United States, Australia, Europe and Rest of World. For the three and nine months ended September 30, 2024 and 2023, the Company primarily sold the Lap-Band system and accessories. The following table presents the Company’s revenue disaggregated by geography:
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
United States | $ | | $ | | $ | | $ | | ||||
Australia | | | | | ||||||||
Europe | | | | | ||||||||
Rest of World | | | | | ||||||||
Total revenue | $ | | $ | | $ | $ | ||||||
Operating Segments
The Company conducts operations worldwide and is managed in the following geographical regions: United States, Australia, Europe and the Rest of World (primarily in the Middle East). All regions sell the Lap-Band system, which consisted of nearly all our revenue and gross profit for the three and nine months ended September 30, 2024 and 2023. There was
(8) Income Taxes
During the three months ended September 30, 2024 and 2023, the Company recorded income tax expense of $
In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Based on the level of historical losses, projections of losses in future periods and potential limitations pursuant to changes in ownership under Internal Revenue Code Section 382, the Company provided a full valuation allowance at both September 30, 2024 and December 31, 2023.
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(9) Stock-based Compensation
Stock-based compensation expense related to stock options and RSUs issued under the ReShape Lifesciences Inc. 2022 Stock Incentive Plan (the “Plan”) for the three months and nine months ended September 30, 2024 and 2023 were as follows:
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
Sales and marketing | $ | | $ | | $ | | $ | | ||||
General and administrative | | | | | ||||||||
Research and development | | | | | ||||||||
Total stock-based compensation expense | $ | | $ | | $ | | $ | | ||||
Stock Options
A summary of the status of the Company’s stock options as of September 30, 2024, and changes during the nine months ended September 30, 2024, are as follows:
| Weighted | |||||||||
Weighted | Average | Aggregate | ||||||||
Average | Remaining | Intrinsic | ||||||||
| Exercise Price | Contractual | Value | |||||||
Shares | Per Share | Life (years) | (in thousands) | |||||||
Outstanding at December 31, 2023 |
| | $ | | $ | — | ||||
Options granted |
| — | — | |||||||
Options exercised |
| — | — | |||||||
Options cancelled |
| ( | | |||||||
Outstanding at September 30, 2024 |
| | $ | | $ | — | ||||
Exercisable at September 30, 2024 | | $ | | $ | — | |||||
Vested and expected to vest at September 30, 2024 | | $ | | $ | — | |||||
There was
Stock option awards outstanding under the Company’s incentive plans have been granted at exercise prices that are equal to the market value of its common stock on the date of grant. Such options generally vest over a period of
Expected Term – The estimate of expected term is based on the historical exercise behavior of grantees, as well as the contractual life of the options granted.
Expected Volatility – The expected volatility factor is based on the volatility of the Company’s common stock for a period equal to the term of the stock options.
Risk-free Interest Rate – The risk-free interest rate is determined using the implied yield for a traded zero-coupon U.S. Treasury bond with a term equal to the expected term of the stock options.
Expected Dividend Yield – The expected dividend yield is based on the Company’s historical practice of paying dividends on its common stock.
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Restricted Stock Units
A summary of the Company’s unvested RSUs award activity for the nine months ended September 30, 2024, is as follows:
Weighted | |||||
Average | |||||
| Grant Date | ||||
Shares | Fair Value | ||||
Unvested RSUs at December 31, 2023 |
| | $ | | |
Granted |
| — | — | ||
Vested (1) |
| ( | $ | ( | |
Cancelled/Forfeited |
| — | — | ||
Non-vested RSUs at September 30, 2024 |
| | $ | | |
| (1) | At September 30, 2024, there were |
The fair value of each RSU is the closing stock price on the Nasdaq of the Company’s common stock on the date of grant. Upon vesting, a portion of the RSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining RSUs will be settled in shares of the Company’s common stock after the vesting period. The unrecognized compensation cost related to the RSUs at September 30, 2024 was $
(10) Commitment and Contingencies
Litigation
On August 6, 2021, Cowen and Company, LLC filed a complaint against ReShape, as successor in interest to Obalon Therapeutics, in the Supreme Court of the State of New York based on an alleged breach of contract arising out of Cowen’s prior engagement as Obalon’s financial advisor. The complaint alleges that Cowen is entitled to be paid a $
The Company is not aware of any pending or threatened litigation against it that could have a material adverse effect on the Company’s business, operating results or financial condition, other than what was disclosed above. The medical device industry in which the Company operates is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. As a result, the Company may be involved in various legal proceedings from time to time.
Product Liability Claims
The Company is exposed to product liability claims that are inherent in the testing, production, marketing, and sale of medical devices. Management believes any losses that may occur from these matters are adequately covered by insurance, and the ultimate outcome of these matters will not have a material effect on the Company’s financial position or results of operations. The Company is not currently a party to any product liability litigation and is not aware of any pending or threatened product liability litigation that is reasonably possible to have a material adverse effect on the Company’s business, operating results or financial condition.
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(11) Subsequent Events
In a private transaction, on October 16, 2024, the Company entered into a securities purchase agreement (the “SPA”) with an institutional investor (the “Investor”). Pursuant to the SPA, the Company agreed to issue the Investor a senior secured convertible note in the aggregate original principal amount of $
The Company is the issuer of the Note, and its respective subsidiaries will guaranty the obligations under the Note pursuant to a Guaranty, dated October 16, 2024 (the “Guaranty”). The Note is fully secured by collateral of the Company and its subsidiaries. The security interest in favor of the Investor, as collateral agent, covers substantially all assets of the Company including, without limitation, the intellectual property, trademark, and patent rights of the Company. The parties entered into a Security Agreement (the “Security Agreement”) and certain intellectual property security agreements granting such security interest in favor of the Investor.
In connection with the SPA, the Company issued to the Investor the Note on October 16, 2024, which bears an interest rate of
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.
Except for the historical information contained herein, the matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements that involve risks and uncertainties. In some cases, these statements may be identified by terminology such as “may,” “will,” “should,” “expects,” “could,” “intends,” “might,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. These statements involve known and unknown risks and uncertainties that may cause our results, level of activity, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to such differences include, among others, those discussed in the “Risk Factors” section included in Item 1A of our most recent Annual Report on Form 10-K.
Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this report.
Overview
We are the premier physician-led weight loss and metabolic health-solutions company, offering an integrated portfolio of proven products and services that manage and treat obesity and associated metabolic disease. Our primary operations are in the following geographical areas: United States, Australia and certain European and Middle Eastern countries. Our current portfolio includes the Lap-Band Adjustable Gastric Banding System, the Obalon Balloon System, and the Diabetes Bloc-Stim Neuromodulation device, a technology under development as a new treatment for type 2 diabetes mellitus. There has been no revenue recorded for the Obalon Balloon System, and there has been no revenue recorded for the Diabetes Bloc-Stim Neuromodulation as this product is still in the development stage.
On July 8, 2024, ReShape, Vyome Therapeutics, Inc., a Delaware corporation (“Vyome”), and Raider Lifesciences Inc., a Delaware corporation, and a direct, wholly owned subsidiary of ReShape (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Simultaneously with the execution of the Merger Agreement, ReShape entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Ninjour Health International Limited, a company incorporated under the laws of the United Kingdom (“Ninjour”), an affiliate of Biorad.
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Results of Operations
The following table sets forth certain data from our unaudited consolidated statements of operations expressed as percentages of revenue (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Revenue | $ | 2,292 | 100.0 | % | $ | 2,155 | 100.0 | % | $ | 6,201 | 100.0 | % | $ | 6,696 | 100.0 | % | |||||||
Cost of revenue | 853 | 37.2 | % | 867 | 40.2 | % | 2,463 | 39.7 | % | 2,990 | 44.7 | % | |||||||||||
Gross profit | 1,439 | 62.8 | % | 1,288 | 59.8 | % | 3,738 | 60.3 | % | 3,706 | 55.3 | % | |||||||||||
Operating expenses: | |||||||||||||||||||||||
Sales and marketing | 719 | 31.4 | % | 1,791 | 83.1 | % | 2,408 | 38.8 | % | 6,150 | 91.8 | % | |||||||||||
General and administrative | 2,082 | 90.8 | % | 2,058 | 95.5 | % | 6,074 | 98.0 | % | 8,724 | 130.3 | % | |||||||||||
Research and development | 399 | 17.4 | % | 542 | 25.2 | % | 1,282 | 20.7 | % | 1,576 | 23.5 | % | |||||||||||
Impairment of long-lived assets | 777 | 36.1 | 777 | 11.6 | % | ||||||||||||||||||
Gain on disposal of assets, net | — | — | % | — | — | % | — | — | % | (33) | (0.5) | % | |||||||||||
Total operating expenses | 3,200 | 139.6 | % | 5,168 | 239.9 | % | 9,764 | 157.5 | % | 17,194 | 256.7 | % | |||||||||||
Operating loss | (1,761) | (76.8) | % | (3,880) | (180.1) | % | (6,026) | (97.2) | % | (13,488) | (201.4) | % | |||||||||||
Other expense (income), net: | |||||||||||||||||||||||
Interest income, net | — | — | % | (5) | (0.2) | % | (13) | (0.2) | % | (9) | (0.1) | % | |||||||||||
Gain on changes in fair value of liability warrants | (27) | (1.2) | % | (412) | (19) | % | (46) | (0.7) | % | (3,850) | (57.5) | % | |||||||||||
Gain on extinguishment of debt | — | — | % | — | — | % | (429) | (6.9) | % | — | — | % | |||||||||||
Loss (gain) on foreign currency exchange, net | (50) | (2.2) | % | 68 | 3.2 | % | (10) | (0.2) | % | 47 | 0.7 | % | |||||||||||
Other | (109) | (4.8) | % | — | — | % | (193) | (3.1) | % | (8) | (0.1) | % | |||||||||||
Loss before income tax provision | (1,575) | (68.6) | % | (3,531) | (164.0) | % | (5,335) | (86.1) | % | (9,668) | (144.4) | % | |||||||||||
Income tax expense | 6 | 0.3 | % | 3 | 0.1 | % | 34 | 0.5 | % | 21 | 0.3 | % | |||||||||||
Net loss | $ | (1,581) | (68.9) | % | $ | (3,534) | (164.0) | % | $ | (5,369) | (86.6) | % | $ | (9,689) | (144.7) | % | |||||||
Non-GAAP Disclosures
In addition to the financial information prepared in conformity with GAAP, we provide certain historical non-GAAP financial information. Management believes that these non-GAAP financial measures assist investors in making comparisons of period-to-period operating results.
Management believes that the presentation of this non-GAAP financial information provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, and amortization methods, which provides a more complete understanding of our financial performance, competitive position, and prospects for the future. However, the non-GAAP financial measures presented in Form 10-Q have certain limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Further, the non-GAAP financial measures presented by the Company may be different from similarly named non-GAAP financial measures used by other companies.
Adjusted EBITDA
Management uses adjusted EBITDA in its evaluation of the Company’s core results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Adjusted EBITDA is defined as net loss before interest, taxes, depreciation and amortization, stock-based compensation, changes in fair value of liability warrants, and other one-time costs.
21
The following table contains a reconciliation of GAAP net loss to Adjusted EBITDA attributable to common stockholders for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||
GAAP net loss | $ | (1,581) | $ | (3,534) | $ | (5,369) | $ | (9,689) | |||
Adjustments: | |||||||||||
Interest (income) expense, net | — | (5) | (13) | (9) | |||||||
Income tax expense (benefit) | 6 | 3 | 34 | 21 | |||||||
Depreciation and amortization | 6 | 50 | 17 | 147 | |||||||
Stock-based compensation expense | 32 | 216 | 169 | 656 | |||||||
Gain on disposal of assets, net | — | — | — | (33) | |||||||
Impairment of long-lived assets | — | 777 | — | 777 | |||||||
Gain on changes in fair value of liability warrants | (27) | (412) | (46) | (3,850) | |||||||
Gain on extinguisment of debt | — | — | (429) | — | |||||||
Adjusted EBITDA | $ | (1,564) | $ | (2,905) | $ | (5,637) | $ | (11,980) | |||
Comparison of Results of Operations
Three months ended September 30, 2024 and September 30, 2023
Revenue. The following table summarizes our unaudited revenue by geographic location based on the location of customers for the three months ended September 30, 2024 and 2023, as well as the percentage of each location to total revenue and the amount of change and percentage of change (dollars in thousands):
Three Months Ended September 30, | Amount | Percentage | |||||||||||||||
2024 | 2023 | Change | Change | ||||||||||||||
United States | $ | 2,009 | 87.8 | % | $ | 1,732 | 80.4 | % | $ | 277 | 16.0 | % | |||||
Australia | 111 | 4.8 | % | 139 | 6.5 | % | (28) | (20.1) | % | ||||||||
Europe | 168 | 7.3 | % | 258 | 12.0 | % | (90) | (34.9) | % | ||||||||
Rest of World | 4 | 0.2 | % | 26 | 1.1 | % | (22) | (84.6) | % | ||||||||
Total revenue | $ | 2,292 | 100.1 | % | $ | 2,155 | 100.0 | % | $ | 137 | 6.4 | % | |||||
Revenue totaled $2.3 million for the three months ended September 30, 2024, which represents an increase of 6.4%, or $0.1 million compared to the same period in 2023. This primarily resulted from a small increase in sales volume offset by continued pressure primarily from GLP-1 pharmaceutical weight-loss alternatives.
Cost of Goods Sold and Gross Profit. The following table summarizes our unaudited cost of revenue and gross profit for the three months ended September 30, 2024 and 2023, as well as the percentage compared to total revenue and amount of change and percentage of change (dollars in thousands):
Three Months Ended September 30, | Amount | Percentage | |||||||||||||||
2024 | 2023 | Change | Change | ||||||||||||||
Revenue | $ | 2,292 | 100.0 | % | $ | 2,155 | 100.0 | % | $ | 137 | 6.4 | % | |||||
Cost of revenue | 853 | 37.2 | % | 867 | 40.2 | % | (14) | (1.6) | % | ||||||||
Gross profit | $ | 1,439 | 62.8 | % | $ | 1,288 | 59.8 | % | $ | 151 | 11.7 | % | |||||
Gross Profit. Gross profit for the three months ended September 30, 2024, was $1.4 million, which was slightly above $1.3 million for the same period in 2023. Gross profit as a percentage of total revenue for the three months ended September 30, 2024, was 62.8% compared to 59.8% for the same period in 2023. The increase in gross profit percentage is due to the reduction in overhead related costs, primarily payroll, as we had a reduction of employees late in 2023.
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Operating Expense. The following table summarizes our unaudited operating expenses for the three months ended September 30, 2024 and 2023, as well as the percentage of total revenue and the amount of change and percentage of change (dollars in thousands):
Three Months Ended September 30, | Amount | Percentage | |||||||||||||||
2024 | 2023 | Change | Change | ||||||||||||||
Sales and marketing | $ | 719 | 31.4 | % | $ | 1,791 | 83.1 | % | $ | (1,072) | (59.9) | % | |||||
General and administrative | 2,082 | 90.8 | % | 2,058 | 95.5 | % | 24 | 1.2 | % | ||||||||
Research and development | 399 | 17.4 | % | 542 | 25.2 | % | (143) | (26.4) | % | ||||||||
Impairment of long-lived assets | — | — | % | 777 | 36.1 | % | (777) | (100.0) | % | ||||||||
Total operating expenses | $ | 3,200 | 139.6 | % | $ | 5,168 | 239.9 | % | $ | (1,968) | (38.1) | % | |||||
Sales and Marketing Expense. Sales and marketing expenses for the three months ended September 30, 2024, decreased by $1.1 million, or 59.9%, to $0.7 million, compared to $1.8 million for the same period in 2023. The decrease is primarily due to a decrease of $0.5 million in advertising and marketing expenses, including consulting and professional marketing services, as the Company has reevaluated its marketing approach and has moved to a targeted digital marketing campaign, resulting in a reduction of costs. Additionally, there was a decrease of $0.5 million in payroll-related expenditures, including commissions, stock compensation expense and travel, due to changes in sales personnel and a reduction in sales, and a reduction of $0.1 million in other expenses.
General and Administrative Expense. General and administrative expenses for the three months ended September 30, 2024, increased by $24 thousand, or 1.2%, to approximately $2.1 million, compared to $2.1 million for the same period in 2023. The increase is primarily due a $0.4 million increase in professional services primarily related to the merger and asset sale transaction that was entered into during July 2024, offset by a $0.2 million reduction in employee related expenses, $0.1 million in bad debt expense, and $0.1 million in other expenses.
Research and Development Expense. Research and development expenses for the three months ended September 30, 2024, decreased by $0.1 million, or 26.4% to $0.4 million, compared to the same period in the prior year. The primary reason for the decrease is due to a reduction in payroll, consulting and clinical trials, as the Company has paused all clinical work to preserve cash.
Impairment of Long-Lived Assets. Impairment of long-lived assets decreased by $0.8 million for the three months ended September 30, 2024, compared to the same period in the prior year. During the three months ended September 30, 2023, the Company impaired approximately $0.8 million, consisting of fixed assets and intangible assets. During the three months ended September 30, 2024, no impairment was recorded.
Nine months ended September 30, 2024 and September 30, 2023
Revenue. The following table summarizes our unaudited revenue by geographic location based on the location of customers for the nine months ended September 30, 2024 and 2023, as well as the percentage of each location to total revenue and the amount of change and percentage of change (dollars in thousands):
Nine Months Ended September 30, | Amount | Percentage | |||||||||||||||
2024 | 2023 | Change | Change | ||||||||||||||
United States | $ | 5,290 | 85.3 | % | $ | 5,473 | 81.8 | % | $ | (183) | (3.3) | % | |||||
Australia | 316 | 5.1 | % | 419 | 6.3 | % | (103) | (24.6) | % | ||||||||
Europe | 564 | 9.1 | % | 756 | 11.3 | % | (192) | (25.4) | % | ||||||||
Rest of world | 31 | 0.5 | % | 48 | 0.7 | % | (17) | (35.4) | % | ||||||||
Total revenue | $ | 6,201 | 100.0 | % | $ | 6,696 | 100.1 | % | $ | (495) | (7.4) | % | |||||
Revenue totaled $6.2 million for the nine months ended September 30, 2024, which represents a contraction of 7.4%, or $0.5 million compared to the same period in 2023. This primarily resulted from a decrease in sales volume primarily due to GLP-1 pharmaceutical weight-loss alternatives.
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Cost of Goods Sold and Gross Profit. The following table summarizes our unaudited cost of revenue and gross profit for the nine months ended September 30, 2024 and 2023, as well as the percentage compared to total revenue and amount of change and percentage of change (dollars in thousands):
Nine Months Ended September 30, | Amount | Percentage | |||||||||||||||
2024 | 2023 | Change | Change | ||||||||||||||
Revenue | $ | 6,201 | 100.0 | % | $ | 6,696 | 100.0 | % | $ | (495) | (7.4) | % | |||||
Cost of revenue | 2,463 | 39.7 | % | 2,990 | 44.7 | % | (527) | (17.6) | % | ||||||||
Gross profit | $ | 3,738 | 60.3 | % | $ | 3,706 | 55.3 | % | $ | 32 | 0.9 | % | |||||
Gross Profit. Gross profit for both the nine months ended September 30, 2024 and 2023, was $3.7 million, respectively. Gross profit as a percentage of total revenue for the nine months ended September 30, 2024, was 60.3% compared to 55.3% for the same period in 2023. The increase in gross profit percentage is due to the reduction in overhead related costs, primarily payroll, as we had a reduction of employees late in 2023.
Operating Expense. The following table summarizes our unaudited operating expenses for the nine months ended September 30, 2024 and 2023, as well as the percentage of total revenue and the amount of change and percentage of change (dollars in thousands):
Nine Months Ended September 30, | Amount | Percentage | |||||||||||||||
2024 | 2023 | Change | Change | ||||||||||||||
Sales and marketing | $ | 2,408 | 38.8 | % | $ | 6,150 | 91.8 | % | $ | (3,742) | (60.8) | % | |||||
General and administrative | 6,074 | 98.0 | % | 8,724 | 130.3 | % | (2,650) | (30.4) | % | ||||||||
Research and development | 1,282 | 20.7 | % | 1,576 | 23.5 | % | (294) | (18.7) | % | ||||||||
Impairment of long-lived assets | — | — | % | 777 | 11.6 | % | (777) | (100.0) | % | ||||||||
Gain on disposal of assets, net | — | — | % | (33) | (0.5) | % | 33 | (100.0) | % | ||||||||
Total operating expenses | $ | 9,764 | 157.5 | % | $ | 17,194 | 256.8 | % | $ | (7,430) | (43.2) | % | |||||
Sales and Marketing Expense. Sales and marketing expenses for the nine months ended September 30, 2024, decreased by $3.7 million, or 60.8%, to $2.4 million, compared to $6.2 million for the same period in 2023. The decrease is primarily due to a decrease of approximately $2.0 million in advertising and marketing expenses, including consulting and professional marketing services, as the Company has reevaluated its marketing approach and has moved to a targeted digital marketing campaign, resulting in a reduction of costs. Additionally, there was a decrease of $1.6 million in payroll-related expenditures, including commissions, stock compensation expense and travel, due to changes in sales personnel and a reduction in sales, and a $0.1 million reduction in other expenses.
General and Administrative Expense. General and administrative expenses for the nine months ended September 30, 2024, decreased by $2.7 million, or 30.4%, to $6.1 million, compared to $8.7 million for the same period in 2023. The decrease is primarily due to a reduction in professional services, such as audit and legal fees of $1.1 million primarily due to the Company incurring one-time adjustments for professional services related to the February 2023 public offering, and a reduction in payroll-related expenditures, including stock-based compensation expense, of $1.0 million due to decline in staffing levels, and a reduction in rent expense of $0.1 million, as we moved our headquarters at the end of the second quarter of 2023 to a smaller facility to reduce costs. Additionally, there was a reduction in bad debt expense of $0.4 million, and a reduction in other miscellaneous expenses of $0.1 million.
Research and Development Expense. Research and development expenses for the nine months ended September 30, 2024, decreased by $0.3 million, or 18.7% to $1.3 million, compared to approximately $1.6 million for the same period in the prior year. The primary reason for the decrease is due to a reduction in consulting and clinical trials, as the Company has paused all clinical work to preserve cash.
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Impairment of Long-Lived Assets. Impairment of long-lived assets decreased by $0.8 million for the nine months ended September 30, 2024, compared to the same period in the prior year. During the nine months ended September 30, 2023, the Company impaired approximately $0.8 million, consisting of fixed assets and intangible assets. During the nine months ended September 30, 2024, no impairment was recorded.
Gain loss on disposal of assets, net. During the nine months ended September 30, 2023, the Company had a gain of approximately $33 thousand related to the sale of fully depreciated assets. During the nine months ended September 30, 2024, no disposals were recorded.
Liquidity and Capital Resources
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company currently does not generate revenue sufficient to offset operating costs and anticipates such shortfalls to continue as the Company has modified its strategy to a metrics-driven approach through a sustainable and scalable business model, via a digital lead generation and re-engagement strategy. As of September 30, 2024, the Company had net working capital of approximately $1.3 million, primarily due to cash and cash equivalents and restricted cash of $0.8 million. The Company’s principal source of liquidity as of September 30, 2024, consisted of approximately $0.8 million of cash and cash equivalents and restricted cash, and $1.3 million of accounts receivable. Additionally, the Company has raised gross proceeds of $0.7 million from the issuance of a senior secured convertible note on October 16, 2024. Based on its available cash resources, the Company will not have sufficient cash on hand to fund its current operations for more than twelve months from the date of filing this Quarterly Report on Form 10-Q. This condition raises substantial doubt about the Company’s ability to continue as a going concern. The Company believes in the viability of its business strategy, which includes a merger and asset sale, and in its ability to raise additional funds, however, there can be no assurance to that effect. Management’s plans are assuming the merger with Vyome and the asset purchase with Biorad, announced in July of 2024 occur.
The following table summarizes our change in cash and cash equivalents and restricted cash (in thousands):
Nine Months Ended | ||||||
September 30, | ||||||
2024 |
| 2023 | ||||
Net cash used in operating activities | $ | (3,740) | $ | (14,503) | ||
Net cash used in investing activates | — | (10) | ||||
Net cash provided by financing activities |
| 24 |
| 12,113 | ||
Effect of exchange rate changes | — | (6) | ||||
Net change in cash and cash equivalents and restricted cash | $ | (3,716) | $ | (2,406) | ||
Net Cash Used in Operating Activities
Net cash used in operating activities from operations was $3.7 million and $14.5 million for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, net cash used in operating activities was primarily the result of our net loss of $5.4 million, partially offset by non-cash adjustments for stock-based compensation expense of $0.2 million and inventory reserve of $0.1 million, offset by a negative cash impact of $0.4 million related to old accounts payable that have passed their statute of limitations. We show a positive cash impact on accounts payable of $0.7 million, inventory of approximately $0.7 million, accounts receivable of $0.3 million, and prepaid expenses of $0.1 million
For the nine months ended September 30, 2023, net cash used in operating activities was primarily the result of our net loss of $9.7 million, partially offset by non-cash adjustments for stock-based compensation expense of $0.7 million, non-cash offering cost of $0.3 million and bad debt expense of approximately $0.5 million, offset by a negative cash impact related to gains recognized for changes in fair value of liability warrants of $3.9 million. We show a negative cash impact on accounts payable and accrued liabilities of $2.8 million, accounts receivable of $0.4 million, and prepaid expenses of $0.3 million. This was offset by a positive cash impact on inventory of $0.3 million.
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Net Cash Used in Investing Activities
There was no cash used in investing activities for the nine months ended September 30, 2024, and net cash used in investing activities for the nine months ended September 30, 2023, was minimal.
Net Cash Provided by Financing Activities
Financing activities provided $24 thousand related to exercise of warrants for the nine months ended September 30, 2024. Net cash provided by financing activities was $12.1 million for the nine months ended September 30, 2023, due to the proceeds received from the public offering completed during February 2023 and April 2023, less costs to complete the transaction and costs paid related to the October 2023 offering.
Operating Capital and Capital Expenditure Requirements
The Company’s anticipated operations include plans to (i) merge with Vyome Therapeutics, Inc and sell certain assets to Biorad, which will continue the operations, (ii) grow sales and operations of the Company with the Lap-Band product line both domestically and internationally as well as to obtain cost savings synergies, (iii) introduce to the market Lap-Band 2.0 FLEX, (iv) continue development of the Diabetes Bloc-Stim Neuromodulation (“DBSN”) device, and (v) prior to such merger, explore and capitalize on synergistic opportunities to expand our portfolio and offer future minimally invasive treatments and therapies in the obesity continuum of care. The Company believes that it has the flexibility to manage the growth of its expenditures and operations depending on the amount of available cash flows, which could include reducing expenditures for marketing and product development activities. If management’s plans do not develop, and the Company does not raise additional cash in addition to the funds raised in October 2024, at the current burn rate, management expects to run out of cash during the fourth quarter of 2024.
Because of the numerous risks and uncertainties associated with the development of medical devices, such as our Diabetes Bloc-Stim Neuromodulation, we are unable to estimate the exact amounts of capital outlays and operating expenditures necessary to complete the development of the Diabetes Bloc-Stim Neuromodulation or other additional products and successfully deliver a commercial product to the market. Future capital requirements will depend on many factors and will be decided by Biorad, once the pending asset sale is complete.
Critical Accounting Policies and Estimates
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Information with respect to our critical accounting policies and estimates which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes from the information discussed therein.
During the nine months ended September 30, 2024, there were no material changes to our significant accounting policies, which are fully described in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.
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Recent Accounting Pronouncements
See Note 1 to our condensed consolidated financial statements for a discussion of recent accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide disclosure pursuant to this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), defines the term “disclosure controls and procedures” as those 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 recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information 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. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. An internal control material weakness is a significant deficiency, or aggregation of deficiencies, that does not reduce to a relatively low level the risk that material misstatements in financial statements will be prevented or detected on a timely basis by employees in the normal course of their work. An internal control significant deficiency, or aggregation of deficiencies, is one that could result in a misstatement of the financial statements that is more than inconsequential. In making its assessment of internal control over financial reporting management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2024, and determined that our internal control over financial reporting was not effective at a reasonable assurance level due to the following material weaknesses in our internal control over financial reporting:
Control Environment: The Company has insufficient internal resources with appropriate accounting and finance knowledge and expertise to design, implement, document and operate effective internal controls over the financial reporting process. As a result, there was a lack of management review over several areas of the consolidated financial statements, including errors which were individually assessed as significant deficiencies that, when aggregated, resulted in a material weakness related to: 1) insufficient review of obsolete and scrap inventory; 2) insufficient reviews of accounts payable; and 3) inappropriate application of accounting standards related to functional currency. In addition to these identified errors, there were other areas of the consolidated financial statements that were impacted by certain deficiencies. During the prior year, there were deficiencies identified that have not yet been remediated including misstatements of inaccurate reporting of earnings per share due to formula errors over the weighted average share calculation spreadsheet and errors to the stock-based compensation expense. The root cause of all of the deficiencies identified above was related to insufficient internal resources with appropriate accounting and finance knowledge, which aggregated into this material weakness.
Journal Entry Access and Review: The Company did not have effective processes to ensure that all journal entries were properly approved prior to being posted to the general ledger. Furthermore, a segregation of duties conflict is present as the Sr. Accounting Manager has the ability to both prepare and post journal entries to the general ledger. As a result, it was concluded that there is material weakness in the design and operating effectiveness of internal controls over access and reviews of journal entries.
Information Technology (“IT”) Access Change and IT Security: A segregation of duties conflict is present as access, change management and other IT security risks to the Company’s information technology systems are not monitored or reviewed on a timely basis. This material weakness resulted from the aggregation of various control deficiencies.
Financial Reporting:
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Inventory Capitalization – The Company’s controls were not designed effectively as the Company did not have a process in place to evaluate the amount of inventory, cost of goods sold, general and administrative expenses, and research and development expenses.
Income Taxes – The Company did not design and maintain effective management review controls at a sufficient level of precision over the accounting for income taxes. Management’s controls surrounding the evaluation of income tax provision and related disclosures were not operating effectively as the disclosure was not updated to reflect the appropriate tax amortization related to the accrued settlement account. While this did not have an impact on the financial statements due to the full valuation allowance recorded on the deferred tax assets, this did have an impact on the presentation of the prior year footnote disclosure. Additionally, there were errors identified within the tax provision during the prior year related to cost of goods sold for the Company’s foreign entities. This material weakness resulted in certain material corrections to the financial statements including the establishment of a FIN 48 liability, the tax benefit related to impairment charges recorded for the IPR&D in the prior year, the overstatement of the deferred tax asset and valuation allowance related to depreciable assets in the prior year, a return to provision adjustment in 2022 related to Obalon net operating losses generated in 2021 as a result of inaccurate stock compensation recorded within the tax provision and a difference in pretax book income that was unaccounted for in the disclosure.
Purchase Accounting – The Company did not design and maintain effective management review controls at a sufficient level of precision over the accounting for transactions related to the prepaid D&O insurance policy purchased in connection with the merger transaction in June 2021. This material weakness resulted in certain material corrections to the financial statements and in the restatement of the consolidated financial statements.
We are currently implementing our remediation plan to address the material weaknesses identified above. Such measures include:
| ● | Designing and implementing controls to formalize roles and review responsibilities to align with our team's skills and experience and designing and implementing formalized controls. |
| ● | Designing and implementing formal processes, policies and procedures supporting our financial close process. |
| ● | Designing a formal review of a monthly journal entry report to ensure journal entries are appropriately approved within a timely manner. |
Changes in Internal Control over Financial Reporting
Other than in connection with executing upon the continued implementation of the remediation measures referenced above, there have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 6, 2021, Cowen and Company, LLC filed a complaint against ReShape, as successor in interest to Obalon Therapeutics, in the Supreme Court of the State of New York based on an alleged breach of contract arising out of Cowen’s prior engagement as Obalon’s financial advisor. The complaint alleges that Cowen is entitled to be paid a $1.35 million fee in connection with ReShape’s merger with Obalon under the terms of Cowen’s engagement agreement with Obalon. The complaint also sought reimbursement of Cowen’s attorneys’ fees and interest in connection with its claim. On May 11, 2023, the Supreme Court of the State of New York issued the final judgement in favor of Cowen & Company in the amount of $1.35 million, plus interest at the statutory rate of 9% per annum from June 16, 2021 until judgement is paid in full, and reimbursement of $675,000 of Cowen’s attorneys’ fees, with $275,000 to be paid upfront, $200,000 paid after six months and $200,000 paid after 12 months. As of September 30, 2024, the Company has paid the judgement, interest and legal fees in full.
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The Company is not aware of any pending or threatened litigation against it that could have a material adverse effect on the Company’s business, operating results or financial condition, other than what was disclosed above. The medical device industry in which the Company operates is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. As a result, the Company may be involved in various legal proceedings from time to time.
ITEM 1A. RISK FACTORS
Except for the additional risk factors set forth below, there have been no material changes to the risk factors set forth in Item 1A. “Risk Factors” of our 2023 Annual Report on Form 10-K filed on April 1, 2024.
The Merger may not be consummated unless important conditions are satisfied or waived and there can be no assurance that the Merger will be consummated.
The Merger Agreement contains a number of conditions that must be satisfied or waived (to the extent permitted by applicable law) to consummate the Merger. Those conditions include, among others:
| ● | approval of the proposal to issue shares of our common stock pursuant to the Merger Agreement and approval of the proposal to sell our assets pursuant to the Asset Purchase Agreement by our stockholders; |
| ● | approval of the proposal to complete the Merger by Vyome’s stockholders; |
| ● | the absence of any adverse law or order promulgated, entered, enforced, enacted, or issued by any government entity that prohibits, restrains, or makes illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement; |
| ● | the effectiveness of a registration statement on Form S-4 under the Securities Act of 1933, as amended, and the absence of any stop order issued by the SEC suspending the use of such registration statement; |
| ● | the shares of our common stock to be issued in the Merger being approved for listing on The Nasdaq Capital Market and approval of the combined company’s continued listing on The Nasdaq Capital Market; |
| ● | subject to certain materiality exceptions, the accuracy of certain representations and warranties of each of Vyome and ReShape contained in the Merger Agreement and the compliance by each party with the covenants contained in the Merger Agreement; and |
| ● | the absence of a material adverse effect with respect to each of Vyome and ReShape. |
These conditions to the consummation of the Merger may not be satisfied or waived (to the extent permitted by applicable law) and, as a result, the Merger may not be consummated at the time expected, or at all. In addition, we or Vyome may elect to terminate the Merger Agreement in certain other circumstances.
Failure to consummate the Merger could negatively impact our future operations and financial results and our future stock price.
If the Merger is not consummated for any reason, we may be subjected to a number of material risks, including the following:
| ● | a decline in the market price of the shares of our common stock to the extent that the current market prices reflect a market assumption that the Merger will be consummated and will be beneficial to the value of our business after the closing date of the Merger; |
| ● | having to pay certain costs related to the proposed Merger, such as legal, accounting, financial advisory, printing and mailing fees, which must be paid regardless of whether the Merger is consummated; |
| ● | addressing the consequences of operational decisions made since the signing of the Merger Agreement, including because of restrictions on our operations imposed by the terms of the Merger Agreement and decisions to delay or defer capital expenditures; |
| ● | returning the focus of management and personnel to operating ReShape on a standalone basis, without any of the benefits expected to have been provided by the consummation of the Merger; and |
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| ● | negative reactions from our stockholders, suppliers, employees, and the medical community. |
In addition to the above risks, we may be required, under certain circumstances, to pay Vyome a termination fee of $1.0 million, which may materially adversely affect our financial condition. Our business may be adversely impacted by the failure to pursue other beneficial opportunities due to the focus of our management on the Merger. A failure to consummate the Merger may also result in negative publicity, reputational harm, litigation against us or our directors and officers, and a negative impression of ReShape in the financial markets.
If the Merger is not consummated, we cannot assure our stockholders that these risks will not materialize and will not materially adversely affect our business, financial results and stock price.
The Merger may disrupt attention of our management from ongoing business operations.
We have expended, and expect to continue to expend, significant management resources to consummate the Merger. The attention of our management may be diverted away from the day-to-day operations of our businesses, including implementing initiatives to improve performance, execution of existing business plans and pursuing other beneficial opportunities, in an effort to consummate the Merger. This diversion of management resources could disrupt our operations and may have an adverse effect on our business, financial conditions, results of operations and cash flows or the combined company after the closing date of the Merger.
The Asset Purchase may not be consummated unless important conditions are satisfied or waived and there can be no assurance that the Asset Sale will be consummated.
The Asset Purchase Agreement contains a number of conditions that must be satisfied or waived (to the extent permitted by applicable law) to consummate the Asset Sale. Those conditions include, among others:
| ● | approval of the proposal to sell our assets pursuant to the Asset Purchase Agreement by our stockholders; |
| ● | satisfaction of conditions regarding the accuracy of representations and warranties and compliance with covenants in the Asset Purchase Agreement; and |
| ● | the absence of any adverse law or order promulgated, entered, enforced, enacted, or issued by any government entity that prohibits, restrains, or makes illegal the consummation of the Asset Sale or the other transactions contemplated by the Asset Purchase Agreement. |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
In a private transaction, on October 16, 2024, the Company entered into a securities purchase agreement (the “SPA”) with an institutional investor (the “Investor”). Pursuant to the SPA, the Company agreed to issue the Investor a senior secured convertible note in the aggregate original principal amount of $833,333.34 (the “Note”), and also issue to the Investor 7,983 shares of common stock, par value $0.001, of the Company (“Common Stock”) as “commitment shares” to the Investor.
In connection with the SPA, the Company issued to the Investor the Note on October 16, 2024, which bears an interest rate of 10% per annum and is due and payable on the earlier of (i) January 16, 2025 and (ii) the date of consummation or termination of the Company’s previously announced merger with Vyome Therapeutics, Inc. The initial conversion price of the Note is $5.22 per share of Common Stock. The Note may not be converted by the Investor into shares of Common Stock if such conversion would result in the Investor and its affiliates owning in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of all shares issuable upon conversion of the Note. The Note provides for certain events of default that are typical for a transaction of this type, including, among other things, any breach of the representations or warranties made by the Company or its subsidiaries. In connection with any event of default that results in the acceleration of payment of the Note and while it is continuing, the interest rate on the Note shall accrue at an interest rate equal to the lesser of 24% per annum or the maximum rate permitted under applicable law.
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In connection with the SPA, the Company entered into a Registration Rights Agreement with the Investor, dated October 16, 2024 (the “RRA”). The RRA provides that the Company will file a registration statement to register the shares of Common Stock underlying the Note and the commitment shares within 30 days after the date of the SPA and will use its best efforts to cause the registration statement to be declared effective within 30 days after the filing date.
Other than equity securities issued in transactions disclosed above and on our Current Report on Form 8-K filed with the SEC on October 17, 2024, there were no unregistered sales of equity securities during the period.
Uses of Proceeds from Sale of Registered Securities
None.
Purchases of Equity Securities
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications
During the three months ended September 30, 2024, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Exchange Act)
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ITEM 6. EXHIBITS
Exhibit No. |
| Description | |
|---|---|---|---|
2.1 | |||
2.2 | |||
10.1 | |||
10.2 | |||
10.3 | |||
10.4 | |||
31.1** | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2** | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1** | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2** | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101** | Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2024, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements. | ||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||
** | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RESHAPE LIFESCIENCES INC. | |||||
BY: | /s/ paul F. hickey | ||||
Paul F. Hickey | |||||
President and Chief Executive Officer | |||||
(principal executive officer) | |||||
BY: | /s/ thomas stankovich | ||||
Thomas Stankovich | |||||
Senior Vice President and Chief Financial Officer | |||||
(principal financial and accounting officer) | |||||
Dated: November 14, 2024 | |||||
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