10q10k10q10k.net

What changed in Vyome Holdings, Inc's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Vyome Holdings, Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+260 added−299 removedSource: 10-K (2024-04-01) vs 10-K (2023-04-17)

Top changes in Vyome Holdings, Inc's 2023 10-K

260 paragraphs added · 299 removed · 192 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

90 edited+22 added−41 removed165 unchanged
Biggest changeIn executing the first growth pillar, the Company will continue to focus on revenue growth and profitability. ● Growth Pillar II: Expand the product portfolio and future product pipeline . 1 Table of Contents ReShape’s second growth pillar is intended to further differentiate the Company as a leading provider of innovative products and services to meet unmet customer needs.
Biggest changeReShape’s second growth pillar is intended to further differentiate the Company as a leading provider of innovative products and services to meet unmet customer needs. ReShape is committed to drive and scale its new product development and commercialization capacity , providing a cadence of new product introductions and revenue growth.
An overarching strategy for our Company is to develop and commercialize products, programs and services portfolio that is differentiated from our competition by offering transformative technologies that consists of a selection of patient-friendly, non-anatomy changing, lifestyle enhancing products, programs and services that provide alternatives to more invasive bariatric surgeries, and help patients achieve healthy, durable weight loss.
An overarching strategy for our Company is to develop and commercialize products, programs and services portfolio that is differentiated from our competition by offering transformative technologies that consists of a selection of patient-friendly, non-anatomy changing, lifestyle enhancing products, programs and services that provide alternatives to more invasive bariatric surgeries, and help patients achieve healthy and durable weight loss.
We are aware of a number of drugs that are approved for long-term treatment of obesity in the United States: Orlistat, marketed by Roche as Xenical and GlaxoSmithKline as Alli, Belviq marketed by Arena Pharmaceuticals, Inc., Qsymia, marketed by VIVUS, Inc.,Contrave, marketed by Orexigen Therapeutics, Inc. and Wogovy/Ozempic marketed by Novo Nordisk.
We are aware of a number of drugs that are approved for long-term treatment of obesity in the United States: Orlistat, marketed by Roche as Xenical and GlaxoSmithKline as Alli, Belviq marketed by Arena Pharmaceuticals, Inc., Qsymia, marketed by VIVUS, Inc.,Contrave, marketed by Orexigen Therapeutics, Inc. Wogovy/Ozempic marketed by Novo Nordisk.
Market Opportunity Given the limitations of behavioral modification, pharmaceutical therapy and traditional bariatric surgical approaches, we believe there is a substantial need for patient-friendly, safer, effective and durable solutions that: ● provide proven, long-term weight loss; ● preserve normal anatomy; ● are adjustable in an office setting for individual patient needs and long term efficacy; ● are “non-punitive” in that they support continued ingestion and digestion of foods and micronutrients such as vitamins and minerals found in a typical, healthy diet while allowing the user to modify his or her eating behavior appropriately without inducing punitive physical restrictions that physically force a limitation of food intake; ● diminish undesirable side-effects; ● facilitate outpatient surgical procedures; ● minimize the risks of re-operations, malnutrition and mortality; ● reduce the natural hunger drive of patients; and ● are reversible, if necessary or desired, while preserving anatomy.
Market Opportunity Given the limitations of behavioral modification, pharmaceutical therapy and traditional bariatric surgical approaches, we believe there is a substantial need for patient-friendly, safer, effective and durable solutions that: ● provide proven, long-term weight loss; ● preserve normal anatomy; ● are adjustable in an office setting for individual patient needs and long term efficacy; ● are “non-punitive” in that they support continued ingestion and digestion of foods and micronutrients such as vitamins and minerals found in a typical, healthy diet while allowing the user to modify his or her eating behavior appropriately without inducing punitive physical restrictions that physically force a limitation of food intake; ● diminish undesirable side-effects; 6 Table of Contents ● facilitate outpatient surgical procedures; ● minimize the risks of re-operations, malnutrition and mortality; ● reduce the natural hunger drive of patients; and ● are reversible, if necessary or desired, while preserving anatomy.
In the United States, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and all regulations promulgated thereunder, collectively HIPAA, imposes privacy, security and breach reporting obligations with respect to individually identifiable health information upon ‘‘covered entities’’ (health plans, health care clearinghouses and certain health care providers), and their respective business associates, individuals or entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.
In the United States, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and all regulations promulgated thereunder, collectively HIPAA, imposes privacy, security and breach reporting 16 Table of Contents obligations with respect to individually identifiable health information upon ‘‘covered entities’’ (health plans, health care clearinghouses and certain health care providers), and their respective business associates, individuals or entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.
The international patents and patent applications are in regions including Germany, France, Spain, the United Kingdom, Mexico, Canada, Italy, the Netherlands, Portugal, Ireland, Belgium, Poland, Australia, and South Korea. The issued patents expire between the years 2022 and 2031. We also have 48 total U.S. and international trademarks for the Lap-Band brand name.
The international patents and patent applications are in regions including Germany, France, Spain, the United Kingdom, Mexico, Canada, Italy, the Netherlands, Portugal, Ireland, Belgium, Poland, Australia, and South Korea. The issued patents expire between the years 2023 and 2031. We also have 48 total U.S. and international trademarks for the Lap-Band brand name.
Unlike other invasive anatomy altering procedures, the Lap-Band System is adjustable post-operatively via a saline-filled silicone band that is laparoscopically placed around the upper part of the stomach through small laparoscipic incisions, creating a small pouch at the top of the stomach, which slows the passage of food and creates a sensation of fullness.
Unlike other invasive anatomy altering procedures, the Lap-Band System is adjustable post-operatively via a saline-filled silicone band that is laparoscopically placed around the upper part of the stomach through small laparoscopic incisions, creating a small pouch at the top of the stomach, which slows the passage of food and creates a sensation of fullness.
The laws of certain foreign countries do not protect our intellectual property rights to the same extent as do the laws of the United States. L ap -B and As of December 31, 2022, we had approximately 50 total patents, 28 U.S. and 22 foreign, related to our Lap-Band System.
The laws of certain foreign countries do not protect our intellectual property rights to the same extent as do the laws of the United States. L ap -B and As of December 31, 2023, we had approximately 50 total patents, 28 U.S. and 22 foreign, related to our Lap-Band System.
ReShape Vest As of December 31, 2022, we had four granted U.S. patents and four granted foreign patents in China, Israel, Canada and Australia related to our ReShape Vest. The patents expire between the years 2028 and 2038. We also have U.S. and international trademark applications for the ReShape Vest brand name.
ReShape Vest As of December 31, 2023, we had four granted U.S. patents and four granted foreign patents in China, Israel, Canada and Australia related to our ReShape Vest. The patents expire between the years 2028 and 2038. We also have U.S. and international trademark applications for the ReShape Vest brand name.
Regulatory system for medical devices in the United States Unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FFDCA, also referred to as a 510(k) clearance, or approval from the FDA of a premarket approval (“PMA”) application.
Regulatory system for medical devices in the United States Unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States will require either a premarket notification to the FDA requesting permission for 8 Table of Contents commercial distribution under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FFDCA, also referred to as a 510(k) clearance, or approval from the FDA of a premarket approval (“PMA”) application.
Many of our competitors are larger than we are, and they may enjoy several competitive advantages over us, including: ● stronger name recognition; ● existing relations with healthcare professionals, customers and third-party payers; ● established distribution networks; 7 Table of Contents ● significant experience in research and development, manufacturing, preclinical testing, clinical trials, obtaining regulatory approvals, obtaining reimbursement and marketing approved products; and ● greater financial and human resources.
Many of our competitors are larger than we are, and they may enjoy several competitive advantages over us, including: ● stronger name recognition; ● existing relations with healthcare professionals, customers and third-party payers; ● established distribution networks; ● significant experience in research and development, manufacturing, preclinical testing, clinical trials, obtaining regulatory approvals, obtaining reimbursement and marketing approved products; and ● greater financial and human resources.
Penalties for violation of the Anti-Kickback Statute are severe and may include, in addition to the fines and jail time described above, penalties imposed under the Civil Monetary Penalties Law, or the CMP Law, including exclusion from participation in Federal healthcare programs, civil monetary penalties for each improper act, and damages of up to three times the amount of remuneration at issue (regardless of whether some of the remuneration was for a lawful 19 Table of Contents purpose).
Penalties for violation of the Anti-Kickback Statute are severe and may include, in addition to the fines and jail time described above, penalties imposed under the Civil Monetary Penalties Law, or the CMP Law, including exclusion from participation in Federal healthcare programs, civil monetary penalties for each improper act, and damages of up to three times the amount of remuneration at issue (regardless of whether some of the remuneration was for a lawful purpose).
Anti-Kickback Statutes The federal Anti-Kickback Statute prohibits persons from (among other things) knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce the referral of an individual, or the recommending, furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as Medicare or Medicaid.
Anti-Kickback Statutes The federal Anti-Kickback Statute prohibits persons from (among other things) knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce the referral 17 Table of Contents of an individual, or the recommending, furnishing, or arranging for a good or service, for which payment may be made under a federal healthcare program such as Medicare or Medicaid.
Obalon Balloon System Obalon Balloon favorable safety profile, In the pivotal SMART trial, only one of 336 (0.3%) patients that received the Obalon balloon experienced a serious adverse device event (SADE) and in data presented at the American 17 Table of Contents Society for Metabolic and Bariatric Surgery Meeting from the first year of commercial experience, only two of 1,343 (0.14%) patients that received our Obalon balloon experienced a SADE.
Obalon Balloon System Obalon Balloon favorable safety profile, In the pivotal SMART trial, only one of 336 (0.3%) patients that received the Obalon balloon experienced a serious adverse device event (SADE) and in data presented at the American Society for Metabolic and Bariatric Surgery Meeting from the first year of commercial experience, only two of 1,343 (0.14%) patients that received our Obalon balloon experienced a SADE.
The information on, or that may be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered a part of this Annual Report on Form 10-K. ​ 22 Table of Contents
The information on, or that may be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered a part of this Annual Report on Form 10-K. ​ 20 Table of Contents
We are also aware that GI Dynamics, Inc. has received approvals in various international countries to sell its EndoBarrier Gastrointestinal Liner. We also compete against the manufacturers of pharmaceuticals that are directed at treating obesity and the 99% of obese patients eligible for surgery that are not willing to pursue a surgical option.
We are also aware that GI Dynamics, Inc. has received approvals in various international countries to sell its EndoBarrier Gastrointestinal Liner. 5 Table of Contents We also compete against the manufacturers of pharmaceuticals that are directed at treating obesity and the 99% of obese patients eligible for surgery that are not willing to pursue a surgical option.
This strategy also aligns with our key surgeon Lap-Band programs across the U.S.; surgeons who participate in local marketing and educational initiatives in their communities. During 2022, our international sales efforts were through a combination of agent and distributor sales channels, with a focus on top Lap-Band customers in Australia, the Middle East, Canada and select countries in Europe.
This strategy also aligns with our key surgeon Lap-Band programs across the U.S.; surgeons who participate in local co-op marketing and educational initiatives in their communities. During 2023, our international sales efforts were through a combination of agent and distributor sales channels, with a focus on top Lap-Band customers in Australia, the Middle East, Canada and select countries in Europe.
The recent adoption of GLP-1 agonists for weight loss and related big-pharma marketing efforts have signifiancantly increased the number of overweight and obese individuals who are seeking medically managed weight loss. The principal treatment alternatives available today for obesity include: ● Behavioral modification.
The recent adoption surge of GLP-1 agonists for weight loss and related big-pharma marketing efforts have significantly increased the number of overweight and obese individuals who are seeking medically managed weight loss. The principal treatment alternatives available today for obesity include: ● Behavioral modification.
Each member state can appoint Notified Bodies within its jurisdiction. If a Notified Body of one member state has issued a Certificat de 14 Table of Contents Conformité, the device can be sold throughout the European Union without further conformance tests being required in other member states.
Each member state can appoint Notified Bodies within its jurisdiction. If a Notified Body of one member state has issued a Certificat de Conformité, the device can be sold throughout the European Union without further conformance tests being required in other member states.
Drive the Adoption of Our Portfolio through Obesity Therapy Experts and Patient Ambassadors Our clinical development strategy is to collaborate closely with regulatory bodies, healthcare providers, obesity therapy lifestyle experts and others involved in the obesity management process, patients and their advocates and scientific experts.
Drive the Adoption of Our Portfolio through Obesity Therapy Experts and Patient Ambassadors Our clinical development strategy is to collaborate closely with regulatory bodies, healthcare providers, obesity therapy lifestyle experts and others involved in the obesity management process, patients and their advocates and 3 Table of Contents scientific experts.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new 18 Table of Contents authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.
This shift in marketing is 100% aligned with the Company’s focus on expanding Lap-Band use while ensuring a sustainable (profitable) business. The shift to a more targeted and regionalized marketing program allows us to better support interested potential Lap-Band patients while also reducing the overall costs for lead generation programs.
This shift in marketing is 100% aligned with the Company’s focus on expanding Lap-Band use while ensuring a sustainable (profitable) business. The shift to a more 7 Table of Contents targeted and regionalized marketing program allows us to better support interested potential Lap-Band patients while also reducing the overall costs for lead generation programs.
Applications for 15 Table of Contents registration of medical devices in the UAE are done with the UAE Ministry of Health Registration & Drug Control Department and must include data on effectiveness in addition to safety (a nod to the requirements of the FDA).
Applications for registration of medical devices in the UAE are done with the UAE Ministry of Health Registration & Drug Control Department and must include data on effectiveness in addition to safety (a nod to the requirements of the FDA).
In July 2021 we announced that we had completed our Lap-Band manufacturing transition from Apollo Endosurgery, Inc. to a Massachusetts-based contract manufacturer. 9 Table of Contents Given that we rely on third-party manufacturers and suppliers for the production of our products, our ability to increase production going forward will depend upon the experience, certification levels and large-scale production capabilities of our suppliers and manufacturers.
In July 2021 we announced that we had completed our Lap-Band manufacturing transition from Apollo Endosurgery, Inc. to a Massachusetts-based contract manufacturer. Given that we rely on third-party manufacturers and suppliers to produce our products, our ability to increase production going forward will depend upon the experience, certification levels and large-scale production capabilities of our suppliers and manufacturers.
The FDA also may determine that 12 Table of Contents additional tests or clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and data is submitted in an amendment to the PMA, or the PMA is withdrawn and resubmitted when the data are available.
The FDA also may determine that additional tests or clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and data is submitted in an amendment to the PMA, or the PMA is withdrawn and resubmitted when the data are available.
Patent No. 10,463,520, which is related to our Obalon balloon system, by making the Allurion Gastric Balloon system in the U.S. for exportation and/or sales from the U.S and/or for potential sales in the U.S. relating to Allurion’s application to the FDA to sell the Allurion Gastric Balloon in the U.S.
Patent No. 10,463,520, which is related to our intellectual property portfolio, by making the Allurion Gastric Balloon system in the U.S. for exportation and/or sales from the U.S and/or for potential sales in the U.S. relating to Allurion’s application to the FDA to sell the Allurion Gastric Balloon in the U.S.
According to The Obesity Society and the CDC, obesity is associated with many significant weight-related comorbidities including Type 2 5 Table of Contents diabetes, high blood-pressure, sleep apnea, certain cancers, high cholesterol, coronary artery disease, osteoarthritis and stroke.
According to The Obesity Society and the CDC, obesity is associated with many significant weight-related comorbidities including Type 2 diabetes, high blood-pressure, sleep apnea, certain cancers, high cholesterol, coronary artery disease, osteoarthritis and stroke.
Clinical trials must further comply with the FDA’s good clinical practice regulations for institutional review board approval and for informed consent and other human subject protections. Required records and reports are subject to inspection by the FDA.
Clinical trials must further comply with the FDA’s good clinical practice regulations for institutional review board approval and for informed consent and other human subject protections. 9 Table of Contents Required records and reports are subject to inspection by the FDA.
Before approving or denying a PMA, an FDA advisory committee may review the PMA at a public meeting and provide the FDA with the committee’s recommendation on whether the FDA should approve the submission, approve it with specific conditions, or not approve it.
Before approving or denying a PMA, an FDA advisory committee may review the PMA at a public meeting and provide the FDA with the committee’s recommendation on whether the FDA should approve the submission, 10 Table of Contents approve it with specific conditions, or not approve it.
After a 510(k) premarket notification is submitted, the FDA determines whether to accept it for substantive review. If it lacks necessary information for substantive review, the FDA will refuse to accept the 510(k) notification. If 11 Table of Contents it is accepted for filing, the FDA begins a substantive review.
After a 510(k) premarket notification is submitted, the FDA determines whether to accept it for substantive review. If it lacks necessary information for substantive review, the FDA will refuse to accept the 510(k) notification. If it is accepted for filing, the FDA begins a substantive review.
These include: ● The FDA’s QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; ● labeling regulations, unique device identification requirements and FDA prohibitions against the promotion of products for uncleared, unapproved or off label uses; ● advertising and promotion requirements; ● restrictions on sale, distribution or use of a device; ● PMA annual reporting requirements; ● PMA approval of product modifications; ● PMA approval of product ● Medical device reporting, or MDR, regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; ● medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; ● recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; ● an order of repair, replacement or refund; ● device tracking requirements; and ● post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device. 13 Table of Contents Since February 2017, the FDA has issued three separate letters to healthcare providers warning of serious adverse events, including deaths, which are specific to liquid-filled intragastric balloons.
These include: ● The FDA’s QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; ● labeling regulations, unique device identification requirements and FDA prohibitions against the promotion of products for uncleared, unapproved or off label uses; 11 Table of Contents ● advertising and promotion requirements; ● restrictions on sale, distribution or use of a device; ● PMA annual reporting requirements; ● PMA approval of product modifications; ● PMA approval of product ● Medical device reporting, or MDR, regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; ● medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; ● recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; ● an order of repair, replacement or refund; ● device tracking requirements; and ● post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
ReShape Obalon Balloon System The Obalon Balloon System, that is not currently available for commercial sales, consists of a swallowable capsule that contains an inflatable balloon attached to a microcatheter; the Obalon Navigation System console, which is a combination of hardware and software used to dynamically track and display the location of the balloon during placement; the Obalon Touch Inflation Dispenser, which is a semi-automated, hand-held inflation device used to inflate the balloon once it is placed; and a disposable canister filled with our proprietary mixture of gas.
ReShape Obalon Balloon System The FDA PMA approved Obalon Balloon System, is not currently manufactured and distributed for commercial sales, consists of a swallowable capsule that contains an inflatable balloon attached to a microcatheter; the Obalon Navigation System console, has FDA PMA supplemental approval, is a combination of hardware and software used to dynamically track and display the location of the balloon during placement; the Obalon Touch Inflation Dispenser, which is a semi-automated, hand-held inflation device used to inflate the balloon once it is placed; and a disposable canister filled with our proprietary mixture of gas.
Our Products The ReShape Lifesciences’ L ap-Band System, the Obalon Balloon System, Obalon Navigation system and Obalon Touch Inflation Dispenser, and their respective components are medical devices that required a PMA submission form and approval by the FDA for commercial use in the United States.
Supplementary guidance will also be published.​ Our Products The ReShape Lifesciences’ L ap-Band System, the Obalon Balloon System, Obalon Navigation system and Obalon Touch Inflation Dispenser, and their respective components are medical devices that required a PMA submission form and approval by the FDA for commercial use in the United States.
There has been a recent trend of separate state regulation of payments and transfers of value by manufacturers of medical devices to healthcare professionals and entities, however, and some state transparency laws apply more broadly than does the federal Sunshine Act.
There has been a recent trend of separate state regulation of payments and transfers of value by manufacturers of medical devices to healthcare professionals and entities, however, and some state transparency laws apply more broadly than does the federal Sunshine Act. Our business may be subject to some of these state laws.
ReShape remains committed to furthering our proprietary Diabetes Bloc-Stim Neuromodulation (DBSN) technology that can potentially eliminate the need for medications by those with type 2 diabetes. The DBSN device is a technology under development as a new treatment for type 2 diabetes mellitus.
DBSN Device - ReShape remains committed to furthering our proprietary Diabetes Bloc-Stim Neuromodulation (DBSN TM ) technology that can potentially reduce the dependence on medications by those with type 2 diabetes. The DBSN TM device is a technology under development as a new treatment for type 2 diabetes mellitus.
The device is expected to use bioelectronics to manage blood glucose in treatment of diabetes and individualized 24/7 glucose control. The DBSN technology development has received nondilutive NIH grant support. ● Growth Pillar III: Ensuring that the portfolio spans the weight loss care continuum and is evidence-based .
The device is expected to use bioelectronics to manage blood glucose in the treatment of diabetes and individualized 24/7 glucose control. Preclinical evidence on the DBSN device was presented at multiple conferences. The DBSN technology development has received nondilutive NIH grant support. • Growth Pillar III: Ensuring that our portfolio spans the weight loss care continuum and is evidence based.
Transparency Laws The federal Physician Payment Sunshine Act, or the Sunshine Act, which was enacted as part of the Patient Protection and Affordable Care Act, or the PPACA, generally requires certain manufacturers of a drug, device, biologic or other medical supply that is covered by Medicare, Medicaid or the Children’s Health Insurance Program and applicable group purchasing organizations to report on an annual basis: (i) certain payments and other transfers of value given to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care professionals beginning in 2022, and teaching hospitals and (ii) any ownership or investment interest that physicians, or their immediate family members, have in their company.
Many of these state laws apply to claims submitted to any third-party payor and are not limited to claims submitted to a federal healthcare program. 18 Table of Contents Transparency Laws The federal Physician Payment Sunshine Act, or the Sunshine Act, which was enacted as part of the Patient Protection and Affordable Care Act, or the PPACA, generally requires certain manufacturers of a drug, device, biologic or other medical supply that is covered by Medicare, Medicaid or the Children’s Health Insurance Program and applicable group purchasing organizations to report on an annual basis: (i) certain payments and other transfers of value given to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care professionals beginning in 2022, and teaching hospitals and (ii) any ownership or investment interest that physicians, or their immediate family members, have in their company.
We have established relationships with physicians, obesity therapy experts, patient advocates, media experts and other market drivers we believe will provide important support towards promoting patient awareness and gaining widespread adoption of the L ap -B and , its accessories, ReShapeCare, ReShape Marketplace, ReShape Optimize and the possible re-introduction of the Obalon Balloon System.
We have established relationships with physicians, obesity therapy experts, patient advocates, media experts and other market drivers we believe will provide important support towards promoting patient awareness and gaining widespread adoption of the L ap -B and , its accessories, Lap-Band 2.0 and the possible re-introduction of the Obalon Balloon System.
This first growth pillar is, in the Company’s opinion, paramount for ReShape in order to deliver shareholder value and, ultimately, profitability. Since shortly after Mr. Hickey’s appointment, ReShape has made a number of operational changes to help ensure future performance and return on investment by prioritizing investments supporting revenue growth.
This first growth pillar remains , in the Company’s opinion, paramount for ReShape to deliver shareholder value and , ultimately, profitability . Starting shortly after Mr. Hickey’s appointment, ReShape has made several operational changes to help ensure future performance and return on investment by prioritizing investments supporting revenue growth .
Our current portfolio includes the FDA-approved and reimbursed Lap-Band® system, which provides minimally invasive, long-term treatment of obesity and is a safer surgical alternative to more invasive and extreme surgical stapling procedures such as the gastric bypass or sleeve gastrectomy.
Our current portfolio includes the FDA-approved and reimbursed Lap-Band® system, which provides minimally invasive, long-term treatment of obesity and is a safer surgical alternative to more invasive and extreme surgical stapling procedures such as the gastric bypass or sleeve gastrectomy. 1 1 ReShape’s Pillars for Growth In August of 2022, Paul F.
Most Class I products are exempt from the premarket notification requirements. 10 Table of Contents Class II devices are those that are subject to the General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, patient registries, FDA guidance documents and post-market surveillance.
Class II devices are those that are subject to the General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, patient registries, FDA guidance documents and post-market surveillance. Most Class II devices are subject to premarket review and clearance by the FDA.
Some Class I devices, also called Class I reserved devices, also require premarket clearance by the FDA through the 510(k) premarket notification process described below.
Some Class I devices, also called Class I reserved devices, also require premarket clearance by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements.
It combines ReShape Lifesciences’ proprietary Vagus Nerve Block (vBloc) technology platform in combination with Vagus nerve stimulation. This new dual Vagus nerve neuromodulation device selectively modulates vagal blocking and stimulation to the liver and pancreas to manage blood glucose. Our DBSN device is expected to use bioelectronics to manage blood glucose in treatment of diabetes and individualized 24/7 glucose control.
This new dual Vagus nerve neuromodulation device selectively modulates vagal blocking and stimulation to the liver and pancreas to manage blood glucose. Our DBSN device is expected to use bioelectronics to manage blood glucose in treatment of diabetes and individualized 24/7 glucose control.
ReShape’s third growth pillar represents the Company’s commitment to collaborate with healthcare professionals worldwide and further develop evidence supporting ReShape’s portfolio of treatment options. ReShape intends to establish and work closely with its first-ever global Scientific Advisory Board (SAB) to provide needed expertise and feedback on initiatives related to the Company’s growth pillars.
ReShape’s third growth pillar represents the Company’s commitment to collaborate with healthcare professionals worldwide and further develop evidence supporting ReShape’s portfolio of treatment options. Aligned with goal of pillar three, in early 2023, ReShape established their first-ever global Scientific Advisory Board (SAB) to provide needed expertise and feedback on initiatives related to the Company’s growth pillars.
The Medical Device Regulation 2017/745, or EU MDR repeals Directive 93/42/EEC, which concerns medical devices, and Directive 90/385/EEC, which concerns active implantable medical devices, as of 26 May 2021. The EU allows a transition period from Directive 93/42/EEC and Directive 90/385/EEC to Regulation (EU) 2017/745, that will end 26 May 2024.
The Medical Device Regulation 2017/745, or EU MDR repeals Directive 93/42/EEC, which concerns medical devices, and Directive 90/385/EEC, which concerns active implantable medical devices, as of 26 May 2021.
These current surgical procedures are performed in less than 1% of all eligible obese patients today. Outside of the Obalon Balloon System which we recently acquired, other current manufacturers of gastric balloon and suturing products that are approved in the United States include Boston Scientific (ORBERA Intragastric Balloon System and OverStitch Endoscopic Suturing System) and Spatz Medical.
Outside of the Obalon Balloon System which we recently acquired, other current manufacturers of gastric balloon and suturing products that are approved in the United States include Boston Scientific (ORBERA Intragastric Balloon System and OverStitch Endoscopic Suturing System) and Spatz Medical.
The FDA approved Obalon Balloon System, which has been off the market since March 2020 and was acquired in connection with the Obalon merger in June of 2021, has not yet been re-introduced to 3 Table of Contents the marketplace.
Current offerings include the Lap-Band System and accessories, and recently approved Lap-Band 2.0. The FDA approved Obalon Balloon System, which has been off the market since March 2020 and was acquired in connection with the Obalon merger in June of 2021, has not yet been re-introduced to the marketplace.
We are aware of the filing of additional reports of serious adverse events, including deaths, associated with liquid-filled balloons since the issuance of the FDA letters to healthcare providers.
Since February 2017, the FDA has issued three separate letters to healthcare providers warning of serious adverse events, including deaths, which are specific to liquid-filled intragastric balloons. We are aware of the filing of additional reports of serious adverse events, including deaths, associated with liquid-filled balloons since the issuance of the FDA letters to healthcare providers.
Our business may be subject to some of these state laws. 20 Table of Contents State Corporate Practice of Medicine, Fee-Splitting Prohibitions, and Licensure Requirements Other regulatory oversight includes, but is not limited to, the corporate practice of medicine, fee-splitting prohibitions, and licensure and scope of practice limitations for physicians and other healthcare professionals.
State Corporate Practice of Medicine, Fee-Splitting Prohibitions, and Licensure Requirements Other regulatory oversight includes, but is not limited to, the corporate practice of medicine, fee-splitting prohibitions, and licensure and scope of practice limitations for physicians and other healthcare professionals.
We file reports and other information with the Securities and Exchange Commission (“SEC”) including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy or information statements.
ReShape Lifesciences shares of common stock trade on the Nasdaq under the symbol RSLS. We file reports and other information with the Securities and Exchange Commission (“SEC”) including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy or information statements.
We intend to continue to pursue further intellectual property protection through U.S. and foreign patent applications. On March 9, 2023, we filed a patent infringement complaint against Allurion Technologies, Inc. in the U.S. District Court for the District of Delaware. The complaint alleges that Allurion is infringing at least two claims of our U.S.
On March 9, 2023, we filed a patent infringement complaint against Allurion Technologies, Inc. in the U.S. District Court for the District of Delaware. The complaint alleged that Allurion is infringing at least two claims of our U.S.
In late 2022, we allocated additional resources to help ensure international sales improve in both volume and profitability. Our Manufacturers and Suppliers To date, all of the materials and components for our products, as well as any related outside services, are procured from qualified suppliers and contract manufacturers in accordance with our proprietary specifications.
Our Manufacturers and Suppliers To date, all of the materials and components for our products, as well as any related outside services, are procured from qualified suppliers and contract manufacturers in accordance with our proprietary specifications.
The centers then perform the Lap-Band procedure and are most-commonly reimbursed by leading insurance providers in the U.S. and government health services in many areas outside the U.S. Alternatively, surgical centers can offer the Lap-Band as a cash-pay procedure.
The centers then perform the Lap-Band procedure and are most-commonly reimbursed by leading insurance providers in the U.S. and government health services in many areas outside the U.S. Alternatively, surgical centers can offer the Lap-Band as a cash-pay procedure. Our sales representatives are supported by field-based experts who provide training, technical support, and other support services at various medical centers.
While in general it is too early to predict what effect, if any, ACA and its implementation, or any future healthcare reform legislation or policies will have on our business, current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition. 21 Table of Contents Employees As of December 31, 2022, we had 40 employees, all of which were full-time.
While in general it is too early to predict what effect, if any, ACA and its implementation, or any future healthcare reform legislation or policies will have on our business, current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition.
Regulatory frameworks for medical devices in certain countries in Asia Pacific and the Middle East Australia ReShape Lifesciences is the legal manufacturer of the Lap-Band System and accessories under the Australian Register of Therapeutic Goods (ARTG), in Australia.
The Lap-Band and ReShape Calibration Tubes Technical Documentations (TDs) are currently under EU MDR conformity assessment by BSI. 13 Table of Contents Regulatory frameworks for medical devices in certain countries in Asia Pacific and the Middle East Australia ReShape Lifesciences is the legal manufacturer of the Lap-Band System and accessories under the Australian Register of Therapeutic Goods (ARTG), in Australia.
Under this new leadership, the Company has pivoted its business strategy with the intent of helping ensure a path of growth and profitability. The three growth strategies, or pillars for growth that the Company intends to execute are: ● Growth Pillar I: Execute disciplined, metrics-driven business operations.
Hickey joined ReShape as President and Chief Executive Officer. Under this new leadership, the Company has pivoted its business strategy with the intent of helping to ensure growth and profitability. The Company has executed the following three growth strategies, or pillars for growth: • Growth Pillar I: Executing disciplined, metrics-driven business operations.
If approved for commercial use, we believe the DBSN device will further enhance our multiple compelling and differentiated medical devices offerings. We believe that we are well positioned for the existing market and can serve more of the overweight and obese population with our solutions and thereby help expand the addressable market for obesity.
We believe that we are well positioned for the existing market and can serve more of the overweight and obese population with our solutions and thereby help expand the addressable market for obesity.
Brexit The UK Medicines & Healthcare Products Regulatory Agency, or MHRA is responsible for regulating medical devices in Great Britain. The MHRA plans changes to the UK’s Medical Devices Regulations 2002 as part of a broader transition away from European Union legal and regulatory systems.
The MHRA plans changes to the UK’s Medical Devices Regulations 2002 as part of a broader transition away from European Union legal and regulatory systems.
Therefore, these devices are subject to the PMA application process, which is generally more costly and time consuming than the 510(k) process. Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction.
Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction.
The UAE body has its own device classification system that is most closely related to that used by the European Union, defined as class 1, low risk; class 2, medium risk but nonimplantable; class 3, medium risk but implantable; and class 4, high risk.
The UAE body has its own device classification system that is most closely related to that used by the European Union, defined as class 1, low risk; class 2, medium risk but nonimplantable; class 3, medium risk but implantable; and class 4, high risk. 14 Table of Contents Brexit The UK Medicines & Healthcare Products Regulatory Agency, or MHRA is responsible for regulating medical devices in Great Britain.
Our principal executive offices are located at 1001 Calle Amanecer, San Clemente, California 92673, and our telephone number is (949) 429-6680. Our website addresses are www.reshapelifesciences.com and lapband.com .
Our principal executive offices are located at 18 Technology Dr, Suite 110, Irvine, California 92618, and our telephone number is (949) 429-6680. Our website addresses are www.reshapelifesciences.com and lapband.com .
The EU MDR aims to ensure the smooth functioning of the internal market as regards medical devices, taking as a base a high level of protection of health for patients and users, and considering the small- and medium-sized enterprises that are active in this sector.
It is essential for legacy devices that their certificates remain valid following changes that are not significant with regard to design or intended purpose and that the required appropriate surveillance is carried out. ​ The EU MDR aims to ensure the smooth functioning of the internal market as regards medical devices, taking as a base a high level of protection of health for patients and users, and considering the small- and medium-sized enterprises that are active in this sector.
Our Product Portfolio Lap-Band System The Lap-Band System is designed to provide minimally invasive long-term treatment of severe obesity and is an alternative to more invasive surgical stapling procedures such as the gastric bypass or sleeve gastrectomy.
Combination therapies comprising GLP-1s and other gastric surgeries, including the Lap-Band, are being prescribed today, to help those who have plateaued with their weight loss. ​ Our Product Portfolio Lap-Band System The Lap-Band System is designed to provide minimally invasive long-term treatment of severe obesity and is an alternative to more invasive surgical stapling procedures such as the gastric bypass or sleeve gastrectomy.
The scope of the FCPA includes interactions with certain healthcare professionals in many countries. International Laws In Europe, and throughout the world, other countries have enacted anti-bribery laws and/or regulations similar to the FCPA. Violations of any of these anti-bribery laws, or allegations of such violations, could have a negative impact on our business, results of operations and reputation.
The scope of the FCPA includes interactions with certain healthcare professionals in many countries. 19 Table of Contents International Laws In Europe, and throughout the world, other countries have enacted anti-bribery laws and/or regulations similar to the FCPA.
Class III devices include devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to those deemed novel and not substantially equivalent following the 510(k) process. The safety and effectiveness of Class III devices cannot be reasonably assured solely by the General Controls and Special Controls described above.
Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process. Class III devices include devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to those deemed novel and not substantially equivalent following the 510(k) process.
The procedure can normally be performed as an outpatient procedure and patients can go home the day of the procedure without the need for an overnight hospital stay. ReShape Calibration Tubes The ReShape Calibration tubes are multifunctional devices compared to reusable bougies and disposable gastric tubes.
The 2 Table of Contents procedure can normally be performed as an outpatient procedure and patients can go home the day of the procedure without the need for an overnight hospital stay.
According to the American Cancer Society, 572,000 Americans die of cancer each year, over one-third of which are linked to excess body weight, poor nutrition and/or physical inactivity. Over 75% of hypertension cases are directly linked to obesity, and more than 90% of the approximately 28 million U.S. adults with Type 2 diabetes are overweight or have obesity.
According to the American Cancer Society, 572,000 Americans die of cancer each year, over one-third of which are linked to excess body weight, poor nutrition and/or physical inactivity.
The Obalon Balloon System was approved in January 2017 and the Obalon Navigation system and Obalon Touch Inflation Dispenser were approved on December 20, 2018. All of the above-listed devices were approved with post-approval conditions intended to ensure the safety and effectiveness of these devices.
All of the above-listed devices were approved with post-approval conditions intended to ensure the safety and effectiveness of these devices. ReShape Lifesciences assumed and complies with all post market requirements for the Lap-Band System, the Obalon Navigation system, and Obalon Touch Inflation Dispenser.
The Calibration tubes are designed to fit the lesser curvature of the stomach more easily and quickly reach the pylorus. In August of 2022, we announced FDA clearance of three new sizes – 32, 36, and 40 French – all designed to simplify bariatric procedures such as laparoscopic sleeve gastrectomy, gastric bypass, and adjustable gastric banding.
In August of 2022, we announced FDA clearance of three new sizes – 32, 36, and 40 French – all designed to simplify bariatric procedures such as laparoscopic sleeve gastrectomy, gastric bypass, and adjustable gastric banding. During the first quarter of 2023, we fully released this product and continue to ramp up production.
All of these employees are located in the U.S. From time to time we also employ independent contractors, consultants and temporary employees to support our operations. None of our employees are subject to collective bargaining agreements. We have never experienced a work stoppage and believe that our relations with our employees are good.
Employees As of December 31, 2023, we had 31 employees, all of which 29 were full-time and 2 were part-time. All of these employees are located in the U.S. From time to time we also employ independent contractors, consultants and temporary employees to support our operations. None of our employees are subject to collective bargaining agreements.
ReShape Marketplace has one trademark related to the online retail store and ReShape Optimize has one trademark related to the multi-vitamins. DBSN Device As of December 31, 2022, we had 9 U.S. patents issued and 45 foreign patents issued. In addition, we have filed a trademark application for Bloc-Stim Neuromodulation.
Obalon As of December 31, 2023, we had 46 granted U.S. patents and 5 granted foreign patents related to our Obalon portfolio. The patents expire between the years 2028 and 2031. DBSN Device As of December 31, 2023, we had 9 U.S. patents issued and 45 foreign patents issued. In addition, we have filed a trademark application for Bloc-Stim Neuromodulation.
There are also international privacy laws that impose restrictions on the access, use, and disclosure of health information. All of these laws may impact our business. Our failure to comply with these privacy laws or significant changes in the laws restricting our ability to obtain required patient information could significantly impact our business and our future business plans. U.S.
Our failure to comply with these privacy laws or significant changes in the laws restricting our ability to obtain required patient information could significantly impact our business and our future business plans. U.S. Healthcare Reform Changes in healthcare policy could increase our costs and subject us to additional regulatory requirements that may interrupt commercialization of our products.
Our Corporate Information We were incorporated under the laws of Delaware on January 2, 2008. On June 15, 2021, we completed a merger with ReShape Lifesciences Inc. Pursuant to the Merger Agreement, a wholly owned subsidiary of Obalon with and into ReShape, with ReShape surviving the merger as a wholly owned subsidiary of Obalon.
We have never experienced a work stoppage and believe that our relations with our employees are good. Our Corporate Information We were incorporated under the laws of Delaware on January 2, 2008. On June 15, 2021, we completed a merger with ReShape Lifesciences Inc.
The ReShape Obalon® Balloon system is the first and only swallowable, gas filled, FDA-approved balloon system. In 2023 the Company plans on further evaluating OEM partnerships and distribution partnerships that would be intended to support the successful relaunch and commercialization of the balloon system.
ReShape Obalon Balloon - The ReShape Obalon® Balloon system is the first and only swallowable, gas filled, FDA-approved balloon system. In 2023 the Company established an OEM partnership with Biorad Medisys (“Biorad”), based in India that will support the successful relaunch and commercialization of the balloon system.
There will continue to be proposals by legislators at both the federal and state levels, regulators and third-party payors to reduce costs while expanding individual healthcare benefits. Certain of these changes could impose additional limitations on the prices we will be able to charge and/or patients’ willingness to pay for our products.
Certain of these changes could impose additional limitations on the prices we will be able to charge and/or patients’ willingness to pay for our products.
Our primary competition in the obesity treatment market is currently from bariatric laparoscopic and endoscopic procedures. Our Lap-Band System competes, and we expect that our Obalon Balloon System may compete, with surgical and endoscopic obesity procedures, including gastric bypass, gastric balloons, sleeve gastrectomy and the endoscopic sleeve.
Our Lap-Band System competes, and we expect that our Obalon Balloon System may compete, with surgical and endoscopic obesity procedures, including gastric bypass, gastric balloons, sleeve gastrectomy and the endoscopic sleeve. These current surgical procedures are performed in less than 1% of all eligible obese patients today.
This number has a projected increase to 50% by 2030. The global economic impact of obesity is approximately $2.0 trillion, or approximately 2.8% of global GDP. Healthcare costs for severely or morbidly obese adults are 81% higher than for healthy weight adults and obesity is responsible for 5% of deaths worldwide.
The World Health Organization (“WHO”) currently estimates that more than 2.5 billion adults, approximately 30% of the global population, are considered overweight or obese. This number has a projected increase to 50% by 2030. The global economic impact of obesity is approximately $2.0 trillion, or approximately 2.8% of global GDP.
The new legislation may create an extra hurdle for manufacturers and thereby limit the availability and/or increase prices of our medical devices in the UK.
The new legislation may create an extra hurdle for manufacturers and thereby limit the availability and/or increase prices of our medical devices in the UK. ​ The UK government published Statutory Instruments 2023 No. 627, The Medical Devices (Amendment) (Great Britain) Regulations 2023 on June 9, 2023, to extend the deadlines for placing CE Marked devices on the GB market.
We believe our products and programs and product candidates could address a $1.64 billion per year and growing global surgical device market.
Healthcare costs for severely or morbidly obese adults are 81% higher than for healthy weight adults and obesity is responsible for 5% of deaths worldwide. We believe our products and programs and product candidates could address a $1.64 billion per year and growing global surgical device market.
As a result of the merger, Obalon, the parent company, was renamed “ReShape Lifesciences Inc.” and ReShape was renamed ReShape Weightloss Inc. ReShape Lifesciences shares of common stock trade on the Nasdaq under the symbol RSLS.
Pursuant to the Merger Agreement, a wholly owned subsidiary of Obalon with and into ReShape, with ReShape surviving the merger as a wholly owned subsidiary of Obalon. As a result of the merger, Obalon, the parent company, was renamed “ReShape Lifesciences Inc.” and ReShape was renamed ReShape Weightloss Inc.

… 73 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

65 edited+26 added−29 removed163 unchanged
Biggest changeRisks Related to Our Business and Industry ● If we are unable to either substantially improve our operating results or obtain additional financing, we may be unable to continue as a going concern. ● Public health crises, such as COVID-19 pandemic, have had, and could in the future have a negative effect on our business. ● We may be unable to attract and retain management and other personnel we need to succeed. ● The shares of series C convertible preferred stock issued in connection with our acquisition of ReShape Medical have certain rights and preferences senior to our common stock, including a liquidation preference that is senior to our common stock. ● No Obalon directors, officers or employees continued with ReShape which could hinder the ability to transfer the Obalon technology, restart manufacturing operations and maintain FDA regulatory compliance for the Obalon Balloon System and negatively impact our results of operations. ● We are a medical device company with a limited history of operations and sales, and we cannot assure you that we will ever generate substantial revenue or be profitable. ● Previously, we recorded a non-cash indefinite-lived and definite-lived intangible assets impairment loss, which significantly impacted our results of operations, and we may be exposed to additional impairment losses that could be material. ● We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives. ● We have identified material weaknesses in our internal control over financial reporting and any failure to maintain effective internal control over financial reporting, may have a material and adverse effect on our business, operating results, financial condition and prospects. ● We reached a determination to restate certain of our previously issued consolidated financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issues. ● The SEC Division of Enforcement has initiated an informal inquiry into our late filing notice related to our quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2022, which could result in an enforcement action that requires us to pay civil penalties and fines and/or sanctions against us or certain of our current and/or former directors and officers. ● General economic and political conditions could have a material adverse effect on our business. ● We hold our deposit within the U.S. banking system and may incur a loss of our uninsured deposits if there a closure or other event with our bank. ● We face significant uncertainty in the industry due to government healthcare reform. ● We are subject, directly or indirectly, to United States federal and state healthcare fraud and abuse and false claims laws and regulations.
Biggest changeThe assumptions underlying these activities may prove to be inaccurate, or we may fail to achieve the expected benefits therefrom. ● We may be unable to attract and retain management and other personnel we need to succeed. ● The shares of series C convertible preferred stock issued in connection with our acquisition of ReShape Medical have certain rights and preferences senior to our common stock, including a liquidation preference that is senior to our common stock. ● We cannot assure you that we will ever generate substantial revenue or be profitable. ● Previously, we recorded a non-cash indefinite-lived and definite-lived intangible assets impairment loss, which significantly impacted our results of operations. ● We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives. ● We have identified material weaknesses in our internal control over financial reporting and any failure to maintain effective internal control over financial reporting, may have a material and adverse effect on our business, operating results, financial condition and prospects. ● General economic and political conditions could have a material adverse effect on our business. ● We hold our deposit within the U.S. banking system and may incur a loss of our uninsured deposits if there a closure or other event with our bank. ● We face significant uncertainty in the industry due to government healthcare reform. ● Public health crises, such as COVID-19 pandemic, have had, and could in the future have a negative effect on our business. ● We are subject, directly or indirectly, to United States federal and state healthcare fraud and abuse and false claims laws and regulations.
The market price for our common stock will be affected by a number of factors, including: • the denial or delay of regulatory clearances or approvals of our product or receipt of regulatory approval of competing products; • our ability to accomplish clinical, regulatory and other product development milestones and to do so in accordance with the timing estimates we have publicly announced; • changes in policies affecting third-party coverage and reimbursement in the United States and other countries; • changes in government regulations and standards affecting the medical device industry and our product; • ability of our products to achieve market success; • the performance of third-party contract manufacturers and component suppliers; • our ability to develop sales and marketing capabilities; • actual or anticipated variations in our results of operations or those of our competitors; 37 Table of Contents • announcements of new products, technological innovations or product advancements by us or our competitors; • developments with respect to patents and other intellectual property rights; • sales of common stock or other securities by us or our stockholders in the future; • additions or departures of key scientific or management personnel; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • the trading volume of our common stock; • changes in earnings estimates or recommendations by securities analysts, failure to obtain or maintain analyst coverage of our common stock or our failure to achieve analyst earnings estimates; • public statements by analysts or clinicians regarding their perceptions of our clinical results or the effectiveness of our products; • decreases in market valuations of medical device companies; and • general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors.
The market price for our common stock will be affected by a number of factors, including: • the denial or delay of regulatory clearances or approvals of our product or receipt of regulatory approval of competing products; • our ability to accomplish clinical, regulatory and other product development milestones and to do so in accordance with the timing estimates we have publicly announced; • changes in policies affecting third-party coverage and reimbursement in the United States and other countries; • changes in government regulations and standards affecting the medical device industry and our product; • ability of our products to achieve market success; • the performance of third-party contract manufacturers and component suppliers; • our ability to develop sales and marketing capabilities; 35 Table of Contents • actual or anticipated variations in our results of operations or those of our competitors; • announcements of new products, technological innovations or product advancements by us or our competitors; • developments with respect to patents and other intellectual property rights; • sales of common stock or other securities by us or our stockholders in the future; • additions or departures of key scientific or management personnel; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • the trading volume of our common stock; • changes in earnings estimates or recommendations by securities analysts, failure to obtain or maintain analyst coverage of our common stock or our failure to achieve analyst earnings estimates; • public statements by analysts or clinicians regarding their perceptions of our clinical results or the effectiveness of our products; • decreases in market valuations of medical device companies; and • general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors.
Our efforts to commercialize these products may not succeed for a number of reasons, including: ● we may not be able to obtain the regulatory approvals required for our DBSN device; ● we may not be able to produce the Obalon Balloon System cost-effectively; ● if we are able to produce the Obalon Balloon System, we may not be able to re-introduce the system into the marketplace; ● our products may not be accepted in the marketplace by physicians, patients and third-party payers; ● the price of our products, associated costs of the surgical procedure and treatment and the availability of sufficient third-party reimbursement for the system implantation and follow-up procedures; ● appropriate reimbursement and/or coding options may not exist to enable billing for the system implantation and follow-up procedures for our DBSN device; ● coverage policies for bariatric surgeries and procedures, including Lap-Band and balloons may be restricted in the future; ● we may not be able to sell our products at a price that allows us to meet the revenue targets necessary to generate enough revenue for profitability; ● the frequency and severity of any side effects of our products; ● physicians and potential patients may not be aware of the perceived effectiveness and sustainability of the results of our products; ● we, or the investigators of our products, may not be able to have information on the outcome of the trials published in medical journals; ● the availability and perceived advantages and disadvantages of alternative treatments, including pharmaceutical treatments; ● any rapid technological change may make our products obsolete; ● we may not be able to have our products manufactured in commercial quantities or at an acceptable cost; ● we may not have adequate financial or other resources to complete the development and commercialization of our products or to develop sales and marketing capabilities for our products; and ● we may be sued for infringement of intellectual property rights and could be enjoined from manufacturing or selling our products. ​ Besides requiring physician adoption, market acceptance of our products will depend on successfully communicating the benefits of our products to three additional constituencies involved in deciding whether to treat a particular patient using our products: (1) the potential patients themselves; (2) institutions such as hospitals, where the procedure would be performed and opinion leaders in these institutions; and (3) third-party payers, such as private healthcare insurers and governmental payers, such as Medicare and Medicaid in the United States, which would ultimately bear most of the costs of the various providers and equipment involved in our Lap-Band System, ReShapeCare, Obalon Balloon System, and DBSN device (if approved for sale).
Our efforts to commercialize these products may not succeed for a number of reasons, including: ● we may not be able to obtain the regulatory approvals required for our DBSN device; ● we may not be able to produce the Obalon Balloon System cost-effectively; ● if we are able to produce the Obalon Balloon System, we may not be able to re-introduce the system into the marketplace; ● our products may not be accepted in the marketplace by physicians, patients and third-party payers; ● the price of our products, associated costs of the surgical procedure and treatment and the availability of sufficient third-party reimbursement for the system implantation and follow-up procedures; ● appropriate reimbursement and/or coding options may not exist to enable billing for the system implantation and follow-up procedures for our DBSN device; ● coverage policies for bariatric surgeries and procedures, including Lap-Band and balloons may be restricted in the future; ● we may not be able to sell our products at a price that allows us to meet the revenue targets necessary to generate enough revenue for profitability; ● the frequency and severity of any side effects of our products; ● physicians and potential patients may not be aware of the perceived effectiveness and sustainability of the results of our products; 29 Table of Contents ● we, or the investigators of our products, may not be able to have information on the outcome of the trials published in medical journals; ● the availability and perceived advantages and disadvantages of alternative treatments, including pharmaceutical treatments; ● any rapid technological change may make our products obsolete; ● we may not be able to have our products manufactured in commercial quantities or at an acceptable cost; ● we may not have adequate financial or other resources to complete the development and commercialization of our products or to develop sales and marketing capabilities for our products; and ● we may be sued for infringement of intellectual property rights and could be enjoined from manufacturing or selling our products. ​ Besides requiring physician adoption, market acceptance of our products will depend on successfully communicating the benefits of our products to three additional constituencies involved in deciding whether to treat a particular patient using our products: (1) the potential patients themselves; (2) institutions such as hospitals, where the procedure would be performed and opinion leaders in these institutions; and (3) third-party payers, such as private healthcare insurers and governmental payers, such as Medicare and Medicaid in the United States, which would ultimately bear most of the costs of the various providers and equipment involved in our Lap-Band System, Obalon Balloon System, and DBSN device (if approved for sale).
Risks Associated with Development and Commercialization of the Lap-Band System, ReShapeCare, Lap-Band 2.0 System, Obalon Balloon System, and the DBSN Device Our efforts to increase revenue from our Lap-Band System, ReShapeCare, Lap-Band 2.0 System, and commercialize our DBSN device and expanded line of bariatric surgical accessories, including ReShape Calibration Tubes, may not succeed or may encounter delays which could significantly harm our ability to generate revenue.
Risks Associated with Development and Commercialization of the Lap-Band System, Lap-Band 2.0 System, Obalon Balloon System, and the DBSN Device Our efforts to increase revenue from our Lap-Band System, Lap-Band 2.0 System, and commercialize our DBSN device and expanded line of bariatric surgical accessories, including ReShape Calibration Tubes, may not succeed or may encounter delays which could significantly harm our ability to generate revenue.
Our Lap-Band System, ReShapeCare, Obalon Balloon System or DBSN device may infringe or be claimed to infringe patents that we do not own or license, including patents that may issue in the future based on patent applications of which we are currently aware, as well as applications of which we are unaware.
Our Lap-Band System, Obalon Balloon System or DBSN device may infringe or be claimed to infringe patents that we do not own or license, including patents that may issue in the future based on patent applications of which we are currently aware, as well as applications of which we are unaware.
Our commercial success depends in part on our ability to obtain protection in the United States and other countries for our Lap-Band System, ReShapeCare, Obalon Balloon System, and DBSN device by establishing and maintaining intellectual property rights relating to or incorporated into our technology and products.
Our commercial success depends in part on our ability to obtain protection in the United States and other countries for our Lap-Band System, Obalon Balloon System, and DBSN device by establishing and maintaining intellectual property rights relating to or incorporated into our technology and products.
The fact that our stockholders and warrant holders can sell substantial amounts of our common stock in the public market, whether or not sales have occurred or are occurring, could make it more difficult for us to raise additional funds through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, or at all. 38 Table of Contents If we fail to meet all applicable Nasdaq Capital Market requirements, Nasdaq could delist our common stock, which could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease.
The fact that our stockholders and warrant holders can sell substantial amounts of our common stock in the public market, whether or not sales have occurred or are occurring, could make it more difficult for us to raise additional funds through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, or at all. 36 Table of Contents If we fail to meet all applicable Nasdaq Capital Market requirements, Nasdaq could delist our common stock, which could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease.
Our ability to generate revenue will depend upon the sales of our Lap-Band System, expanded line of bariatric surgical accessories and ReShapeCare, and successful commercialization of our DBSN device (if approved for sale).
Our ability to generate revenue will depend upon the sales of our Lap-Band System, expanded line of bariatric surgical accessories and successful commercialization of our DBSN device (if approved for sale).
However, as long as any shares of series C convertible preferred stock remain outstanding, we cannot, without the affirmative vote of holders of a majority of the then-outstanding shares of series C convertible preferred stock, (a) alter or change adversely the powers, 25 Table of Contents preferences or rights given to the series C convertible preferred stock (including by the designation, authorization, or issuance of any shares of preferred stock that purports to have equal rights with, or be senior in rights or preferences to, the series C convertible preferred stock), (b) alter or amend the series C convertible preferred stock certificate of designation, (c) amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series C convertible preferred stock, (d) increase the number of authorized shares of series C convertible preferred stock, (e) except for stock dividends or distributions for which adjustments are to be made pursuant to the Series C Certificate of Designation, pay dividends on any shares of capital stock of the Company, or (f) enter into any agreement with respect to any of the foregoing.
However, as long as any shares of series C convertible preferred stock remain outstanding, we cannot, without the affirmative vote of holders of a majority of the then-outstanding shares of series C convertible preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series C convertible preferred stock (including by the designation, authorization, or issuance of any shares of preferred stock that purports to have equal rights with, or be senior in rights or preferences to, the series C convertible preferred stock), (b) alter or amend the series C convertible preferred stock certificate of designation, (c) amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series C convertible preferred stock, (d) increase the number of authorized shares of series C convertible preferred stock, (e) except for stock dividends or distributions for which adjustments are to be made pursuant to the Series C Certificate of Designation, pay dividends on any shares of capital stock of the Company, or (f) enter into any agreement with respect to any of the foregoing.
Any of these impacts, or any other impacts resulting from the factors described 30 Table of Contents above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations. ​ In addition, a vendor on which we are reliant could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on us, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution.
Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations. ​ In addition, a vendor on which we are reliant could be adversely affected by any of the liquidity or other risks that are described above as factors that could result in material adverse impacts on us, including but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit facilities involving a troubled or failed financial institution.
If we become subject to a lawsuit, we may be required to expend significant financial and other resources and our management’s attention may be diverted from our business. ● We are currently in a lawsuit, and may in the future become involved in lawsuits, to protect or enforce our intellectual property, which can be expensive and time consuming and could result in the diversion of significant resources.
If we become subject to a lawsuit, we may be required to expend significant financial and other resources and our management’s attention may be diverted from our business. ● We may in the future become involved in lawsuits, to protect or enforce our intellectual property, which can be expensive and time consuming and could result in the diversion of significant resources.
Due to the valuation allowance against deferred tax assets at December 31, 2022, the net effect of any further limitation will have no impact on results of operations. Adverse developments affecting the financial services industry could adversely affect our current and projected business operations and our financial condition and results of operations.
Due to the valuation allowance against deferred tax assets at December 31, 2023, the net effect of any further limitation will have no impact on results of operations. Adverse developments affecting the financial services industry could adversely affect our current and projected business operations and our financial condition and results of operations.
While we believe that none of such patents and patent applications are applicable to our products and technologies under development, third parties who own or control these patents and patent applications in the United States and abroad could bring claims against us that would cause us to incur substantial expenses and, if such claims are successfully asserted against us, they could cause us to pay substantial damages, could 36 Table of Contents result in an injunction preventing us from selling, manufacturing or using our proposed products and would divert management’s attention.
While we believe that none of such patents and patent applications are applicable to our products and technologies under development, third parties who own or control these patents and patent applications in the United States and abroad could bring claims against us that would cause us to incur substantial expenses and, if such claims are successfully asserted against us, they could cause us to pay substantial damages, could result in an injunction preventing us from selling, manufacturing or using our proposed products and would divert management’s attention.
In the future, we may have additional impairments requiring us to record an impairment loss related to our remaining finite-lived intangible assets, which could also have a material adverse effect on our results of operations. 26 Table of Contents We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.
In the future, we may have additional impairments requiring us to record an impairment loss related to our remaining finite-lived intangible assets, which could also have a material adverse effect on our results of operations. We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.
For example, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, and determined that our internal control over financial reporting was not effective at a reasonable assurance level due to material weaknesses in our internal control over financial reporting.
For example, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, and determined that our internal control over financial reporting was not effective at a reasonable assurance level due to material weaknesses in our internal control over financial reporting.
A product liability claim, regardless of its merit or eventual outcome, could result in decreased demand for our products; injury to our reputation; diversion of management’s attention; withdrawal of clinical trial participants; significant costs 34 Table of Contents of related litigation; substantial monetary awards to patients; product recalls or market withdrawals; loss of revenue; and the inability to commercialize our products under development.
A product liability claim, regardless of its merit or eventual outcome, could result in decreased demand for our products; injury to our reputation; diversion of management’s attention; withdrawal of clinical trial participants; significant costs of related litigation; substantial monetary awards to patients; product recalls or market withdrawals; loss of revenue; and the inability to commercialize our products under development.
The success of our business will depend on our ability to generate increased sales and control costs, as well as our ability to obtain additional regulatory approvals needed to market new versions of our Lap-Band System, ReShapeCare, ReShape Marketplace, Obalon Balloon System, or regulatory approvals needed to market our DBSN device and any other products we may develop in the future, all of which we may be unable to do.
The success of our business will depend on our ability to generate increased sales and control costs, as well as our ability to obtain additional regulatory approvals needed to market new versions of our Lap-Band System, Obalon Balloon System, or regulatory approvals needed to market our DBSN device and any other products we may develop in the future, all of which we may be unable to do.
There was no revenue or gross profit recorded for the DBSN device for the year ended December 31, 2022 and 2021 as this product is still in the research stage of development. There was also no revenue recorded for the Obalon line.
There was no revenue or gross profit recorded for the DBSN device for the year ended December 31, 2023 and 2022 as this product is still in the research stage of development. There was also no revenue recorded for the Obalon line.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, and determined that our internal control over financial reporting was not effective at a reasonable assurance level due to material weaknesses in our internal control over financial reporting.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, and determined that our internal control over financial reporting was not effective at a reasonable assurance level due to material weaknesses in our internal control over financial reporting.
The FDA’s letter indicates a concern for an increased risk for Lap-Band complications in pregnant patients and requests that we provide, among other information, any actions planned or implemented which might reduce the likelihood of 33 Table of Contents such events, which we are in the process of responding to.
The FDA’s letter indicates a concern for an increased risk for Lap-Band complications in pregnant patients and requests that we provide, among other information, any actions planned or implemented which might reduce the likelihood of such events, which we are in the process of responding to.
In addition, a variety of our software systems are cloud-based data management applications, hosted by third-party service providers whose security and information technology systems are subject to similar risks. We operate in a highly competitive industry that is subject to rapid change.
In addition, a 27 Table of Contents variety of our software systems are cloud-based data management applications, hosted by third-party service providers whose security and information technology systems are subject to similar risks. We operate in a highly competitive industry that is subject to rapid change.
An adverse determination in any litigation could subject us to significant liabilities to third parties, require us to seek licenses from or pay royalties to third parties or prevent us from manufacturing, selling or using our proposed products, any of which could have a material adverse effect on our business and prospects.
An adverse determination in any litigation could subject us to significant liabilities 34 Table of Contents to third parties, require us to seek licenses from or pay royalties to third parties or prevent us from manufacturing, selling or using our proposed products, any of which could have a material adverse effect on our business and prospects.
Substantially all of our cash and cash equivalents were held in accounts with Silicon Valley Bank (SVB) at the time it was closed by state regulators, and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver for SVB, on March 10, 2023.
Substantially all of our cash and cash equivalents were held in accounts with Silicon Valley Bank (SVB) at the time it was closed by state regulators, and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver for 28 Table of Contents SVB, on March 10, 2023.
Risks Relating to Ownership of Our Common Stock ● The trading price of our common stock has been volatile and is likely to be volatile in the future. ● Sales of a substantial number of shares of our common stock in the public market by existing stockholders, or the perception that they may occur, could cause our stock price to decline. ● We have a significant number of outstanding warrants, which may cause significant dilution to our stockholders, have a material adverse impact on the market price of our common stock and make it more difficult for us to raise funds through future equity offerings. ● If we fail to meet all applicable Nasdaq Capital Market requirements, Nasdaq could delist our common stock, which could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease. ● You may experience future dilution as a result of future equity offerings. ● Our organizational documents and Delaware law make a takeover of our company more difficult, which may prevent certain changes in control and limit the market price of our common stock. ● We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our common stock. 24 Table of Contents risk factors Risks Related to Our Business and Industry If we are unable to either substantially improve our operating results or obtain additional financing, we may be unable to continue as a going concern.
Risks Relating to Ownership of Our Common Stock ● The trading price of our common stock has been volatile and is likely to be volatile in the future. ● Sales of a substantial number of shares of our common stock in the public market by existing stockholders, or the perception that they may occur, could cause our stock price to decline. ● We have a significant number of outstanding warrants, which may cause significant dilution to our stockholders, have a material adverse impact on the market price of our common stock and make it more difficult for us to raise funds through future equity offerings. ● If we fail to meet all applicable Nasdaq Capital Market requirements, Nasdaq could delist our common stock, which could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease. ● There are risks associated with effecting the Reverse Stock Split, if approved by the Board. ● You may experience future dilution as a result of future equity offerings. ● Our organizational documents and Delaware law make a takeover of our company more difficult, which may prevent certain changes in control and limit the market price of our common stock. ● We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our common stock. 22 Table of Contents risk factors Risks Related to Our Business and Industry If we are unable to either substantially improve our operating results or obtain additional financing, we may be unable to continue as a going concern.
The FDA and our European Notified Body require medical device companies to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance; however, some of 32 Table of Contents these regulatory authorities can review a company’s decision.
The FDA and our European Notified Body require medical device companies to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance; however, some of these regulatory authorities can review a company’s decision.
These provisions, alone 39 Table of Contents or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control. These provisions also could discourage proxy contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions.
These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control. These provisions also could discourage proxy contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions.
Defending a suit, regardless of merit, could be costly, could divert management attention and might result in adverse publicity, which could result in the withdrawal of, or inability to recruit, clinical trial volunteers or result in reduced acceptance of our products in the market.
Defending a suit, regardless of merit, could be costly, could divert management attention and 32 Table of Contents might result in adverse publicity, which could result in the withdrawal of, or inability to recruit, clinical trial volunteers or result in reduced acceptance of our products in the market.
Many of our competitors in the obesity treatment field have significantly greater financial resources and expertise in research and 29 Table of Contents development, manufacturing, preclinical testing, clinical trials, obtaining regulatory approvals and marketing approved products than we do.
Many of our competitors in the obesity treatment field have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, clinical trials, obtaining regulatory approvals and marketing approved products than we do.
We currently do not generate revenue sufficient to offset operating costs and anticipate such shortfalls to continue, partially due to the unpredictability of COVID-19, which has resulted and may continue to result in a slow-down of elective surgeries and restrictions in some locations, and supply chain disruptions.
We currently do not generate revenue sufficient to offset operating costs and anticipate such shortfalls to continue, partially due to the introduction of GLP-1 pharmaceuticals and the unpredictability of COVID-19, which has resulted and may continue to result in a slow-down of elective surgeries and restrictions in some locations, and supply chain disruptions.
In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value 35 Table of Contents of the patent.
In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent.
Such external factors include general domestic and global economic conditions, such as interest rates, tax law including tax rate changes, and factors affecting global economic stability, and the political environment regarding healthcare in general. We cannot predict to what extent the global economic conditions may negatively impact our business.
External factors can affect our financial condition. Such external factors include general domestic and global economic conditions, such as interest rates, tax law including tax rate changes, and factors affecting global economic stability, and the political environment regarding healthcare in general. We cannot predict to what extent the global economic conditions may negatively impact our business.
Marketing to each of these constituencies requires a different marketing approach, and we must convince each of these groups of the efficacy and utility of our products to be successful. 31 Table of Contents During the year ended December 31, 2022 and 2021, there was minimal revenue for ReShapeCare and ReShape Marketplace.
Marketing to each of these constituencies requires a different marketing approach, and we must convince each of these groups of the efficacy and utility of our products to be successful. During the year ended December 31, 2023 and 2022, there was minimal revenue for ReShapeCare and ReShape Marketplace.
Our pending patent applications, those we may file in the future, or those we may license from third parties, may not result in patents being issued. If issued, they may not provide us with proprietary protection or competitive advantages against competitors with similar technology.
Our pending patent applications, those we may file in the future, or those we may license from third parties, may not result in 33 Table of Contents patents being issued. If issued, they may not provide us with proprietary protection or competitive advantages against competitors with similar technology.
If financial institutions in which we hold funds for working capital and operating expenses were to fail, we cannot provide any assurances that such governmental agencies would take action to protect our uninsured deposits in a similar manner. ​ We subsequently moved approximately $7.0 million of our cash and cash equivalents to Bank of America.
If financial institutions in which we hold funds for working capital and operating expenses were to fail, we cannot provide any assurances that such governmental agencies would take action to protect our uninsured deposits in a similar manner. ​ We subsequently moved and hold a portion of our cash and cash equivalents in accounts with Bank of America.
We have a significant number of outstanding warrants, which may cause significant dilution to our stockholders, have a material adverse impact on the market price of our common stock and make it more difficult for us to raise funds through future equity offerings. As of December 31, 2022, we had outstanding 519,219 shares of common stock.
We have a significant number of outstanding warrants, which may cause significant dilution to our stockholders, have a material adverse impact on the market price of our common stock and make it more difficult for us to raise funds through future equity offerings. As of December 31, 2023, we had outstanding 23,457,047 shares of common stock.
As of December 31, 2022, we had net working capital of approximately $2.4 million, primarily due to cash and cash equivalents and restricted cash of $4.0 million. Additionally, our anticipated expansion of our product portfolio and future products may not come to fruition.
As of December 31, 2023, we had net working capital of approximately $6.5 million, primarily due to cash and cash equivalents and restricted cash of $4.6 million. Additionally, our anticipated expansion of our product portfolio and future products may not come to fruition.
Based on our available cash resources, we may not have sufficient cash on hand to fund our current operations for more than 12 months from the date of filing this Form 10-K. This condition raises substantial doubt about our ability to continue as a going concern.
Based on our available cash resources, we may not have sufficient cash on hand to fund our current operations for more than 12 months from the date of filing this Form 10-K. This condition raises substantial doubt about our ability to continue as a going concern. Our current business strategy includes identifying strategic merger and acquisition alternatives.
If we are unable to successfully market our Lap-Band System for its indicated use, successfully launch ReShapeCare and ReShape Marketplace, re-introduce the Obalon Balloon System, or develop and commercialize the DBSN device, we may never become profitable and may have to cease operations as a result.
If we are unable to successfully market our Lap-Band System for its 24 Table of Contents indicated use, successfully re-introduce the Obalon Balloon System, or develop and commercialize the DBSN device, we may never become profitable and may have to cease operations as a result.
ReShape had state net operating loss carryforwards of $329.1 million at December 31, 2022, and had foreign net operating loss carryforwards of $0.2 million at December 31, 2022. Net operating loss carryforwards of ReShape are subject to review and possible adjustment by the taxing authorities.
ReShape had state net operating loss carryforwards of $348.7 million at December 31, 2023, and had foreign net operating loss carryforwards of $0.2 million at December 31, 2023. Net operating loss carryforwards of ReShape are subject to review and possible adjustment by the taxing authorities.
For example, on July 19, 2022, we received a written notice from The Nasdaq Stock Market indicating that we were not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. The notice provided that we have until January 16, 2023 to regain compliance.
For example, on October 10, 2023, we received a written notice from The Nasdaq Stock Market indicating that we were not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. The notice provided that we have until April 7, 2024 to regain compliance.
If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. ​ ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ​
If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. ​
Our competitors may develop and patent processes or products earlier than us, obtain regulatory approvals for competing products more rapidly than we are able to and develop more effective, safer and less expensive products or technologies that would render our products non-competitive or obsolete. Our ability to use net operating losses (“NOL”) carryforwards may be limited.
Our competitors may develop and patent processes or products earlier than us, obtain regulatory approvals for competing products more rapidly than we are able to and develop more effective, safer and less expensive products or technologies that would render our products non-competitive or obsolete.
If our competitors are able to develop and market products that are safer or more effective than our products, our commercial opportunities will be reduced or eliminated. ● Our ability to use net operating losses (“NOL”) carryforwards may be limited. ● Adverse developments affecting the financial services industry could adversely affect our current and projected business operations and our financial condition and results of operations. 23 Table of Contents Risks Associated with Development and Commercialization of the Lap-Band System, ReShapeCare, ReShape, Lap-Band 2.0 System, Obalon Balloon System, DBSN Device ● Our efforts to increase revenue from our L ap -B and System, ReShapeCare, Lap-Band 2.0 System, Obalon Balloon System, and commercialize our DBSN device and expanded line of bariatric surgical accessories, including ReShape Calibration Tubes, may not succeed or may encounter delays which could significantly harm our ability to generate revenue. ● We may not be able to obtain required regulatory approvals for our DBSN device in a cost-effective manner or at all, which could adversely affect our business and operating results. ● We depend on clinical investigators and clinical sites to enroll patients in our clinical trials, and on other third parties to manage the trials and to perform related data collection and analysis, and, as a result, we may face costs and delays that are outside of our control . ● Modifications to the L ap -B and System and Lap-Band 2.0 may require additional approval from regulatory authorities, which may not be obtained or may delay our commercialization efforts. ● If we or our suppliers fail to comply with ongoing regulatory requirements, or if we experience unanticipated product problems, our L ap -B and system could be subject to restrictions or withdrawal from the market. ● We may be unable to manage our growth effectively. ● We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business.
Risks Associated with Development and Commercialization of the Lap-Band System, Lap-Band 2.0 System, Obalon Balloon System, DBSN Device 21 Table of Contents ● Our efforts to increase revenue from our L ap -B and System, Lap-Band 2.0 System, Obalon Balloon System, and commercialize our DBSN device and expanded line of bariatric surgical accessories, including ReShape Calibration Tubes, may not succeed or may encounter delays which could significantly harm our ability to generate revenue. ● We may not be able to obtain required regulatory approvals for our DBSN device in a cost-effective manner or at all, which could adversely affect our business and operating results. ● We depend on clinical investigators and clinical sites to enroll patients in our clinical trials, and on other third parties to manage the trials and to perform related data collection and analysis, and, as a result, we may face costs and delays that are outside of our control . ● Modifications to the L ap -B and System and Lap-Band 2.0 may require additional approval from regulatory authorities, which may not be obtained or may delay our commercialization efforts. ● If we or our suppliers fail to comply with ongoing regulatory requirements, or if we experience unanticipated product problems, our L ap -B and system could be subject to restrictions or withdrawal from the market. ● We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business.
These laws may impact, among other things, our sales, marketing and education programs. 28 Table of Contents The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs.
The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs.
The loss of the services of one or more of our officers or key employees could hinder our sales and marketing efforts, or delay or prevent the commercialization of our Lap-Band System, ReShapeCare, ReShape Marketplace, Lap-Band 2.0, the Obalon Balloon System, and the development of our DBSN device.
Our success depends on the services of our senior management and other key employees. The loss of the services of one or more of our officers or key employees could hinder our sales and marketing efforts, or delay or prevent the commercialization of our Lap-Band System, Lap-Band 2.0, the Obalon Balloon System, and the development of our DBSN device.
The extent to which fear of exposure to or actual effects of COVID-19, new variants, disease outbreak, epidemic or a similar widespread health concern impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence. We may be unable to attract and retain management and other personnel we need to succeed.
The extent to which fear of exposure to or actual effects of COVID-19, new variants, disease outbreak, epidemic or a similar 26 Table of Contents widespread health concern impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
Our operations are directly, or indirectly through customers, subject to various state and federal fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and federal False Claims Act.
Our operations are directly, or indirectly through customers, subject to various state and federal fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and federal False Claims Act. These laws may impact, among other things, our sales, marketing and education programs.
Our principal source of liquidity as of December 31, 2022 consisted of approximately $4.0 million of cash and cash equivalents and restricted cash and $2.2 million of accounts receivable.
Our principal source of liquidity as of December 31, 2023 consisted of approximately $4.6 million of cash and cash equivalents and restricted cash and $1.7 million of accounts receivable.
Due to delays in the clinical trials experienced, we revised its expectations of when revenues would commence for the ReShape Vest, thus reducing the projected near-term future net cash flows related to the ReShape Vest.
Previously, we performed a qualitative impairment analysis of the in-process research and development (“IPR&D”). Due to delays in the clinical trials experienced, we revised its expectations of when revenues would commence for the ReShape Vest, thus reducing the projected near-term future net cash flows related to the ReShape Vest.
In addition, we had outstanding warrants to acquire 193,476 shares of common stock.
In addition, we had outstanding warrants to acquire 15,385,892 shares of common stock.
Prosecutions under such laws have increased in recent years and we may become subject to such litigation. If we are unable to, or have not fully complied with such laws, we could face substantial penalties.
We are subject, directly or indirectly, to United States federal and state healthcare fraud and abuse and false claims laws and regulations. Prosecutions under such laws have increased in recent years and we may become subject to such litigation. If we are unable to, or have not fully complied with such laws, we could face substantial penalties.
As such, we determined the carrying value of the IPR&D and developed technology assets, and trademarks were impaired and recognized a non-cash impairment charge of approximately $18.7 million on the condensed consolidated balance sheet as of December 31, 2022.
As such, we determined the carrying value of the long-lived assets were impaired and recognized a non-cash impairment charge of approximately $0.8 million on the condensed consolidated balance sheet as of December 31, 2023.
Additionally, if the FDA determines that our promotional materials, training or other activities constitute promotion of an unapproved use, we could be subject to significant liability, the FDA could request that we cease, correct or modify our training or promotional materials or subject us to regulatory enforcement actions.
If the FDA or any other regulatory body finds their compliance status to be unsatisfactory, our commercialization efforts could be delayed, which would harm our business and our results of operations. 31 Table of Contents Additionally, if the FDA determines that our promotional materials, training or other activities constitute promotion of an unapproved use, we could be subject to significant liability, the FDA could request that we cease, correct or modify our training or promotional materials or subject us to regulatory enforcement actions.
We have previously reported adverse events associated with the Lap-Band system, including as related to pregnant patients, and may be subject to product liability claims if our products cause, or appear to have caused, an injury. Claims may be made by consumers, healthcare providers, third-party strategic collaborators or others selling our products.
The medical device industry has historically been subject to extensive litigation over product liability claims. We have previously reported adverse events associated with the Lap-Band system, including as related to pregnant patients, and may be subject to product liability claims if our products cause, or appear to have caused, an injury.
As of December 31, 2022, ReShape had U.S. federal net operating loss carryforwards of $207.9 million. Of the total U.S. federal net operating loss carryforwards at December 31, 2022, $6.3 million is subject to a 20 year carryover period and began expiring in 2022. Losses generated beginning in 2018 will carryover indefinitely.
As of December 31, 2023, ReShape had U.S. federal net operating loss carryforwards of $218.9 million. Of the total U.S. federal net operating loss carryforwards at December 31, 2023. Losses generated beginning in 2018 will carryover indefinitely.
We have product liability insurance, which covers the use of our products in our clinical trials and any commercial sales, in an amount we believe is appropriate.
Claims may be made by consumers, healthcare providers, third-party strategic collaborators or others selling our products. We have product liability insurance, which covers the use of our products in our clinical trials and any commercial sales, in an amount we believe is appropriate.
We are currently in a lawsuit, and may in the future become involved in lawsuits, to protect or enforce our intellectual property, which can be expensive and time consuming and could result in the diversion of significant resources. On March 9, 2023, we filed a patent infringement complaint against Allurion Technologies, Inc. in the U.S.
We may in the future become involved in lawsuits, to protect or enforce our intellectual property, which can be expensive and time consuming and could result in the diversion of significant resources.
If we fail to manage these challenges effectively, our business could be harmed. We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business. We may not be able to obtain adequate product liability insurance.
We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business. We may not be able to obtain adequate product liability insurance. Our business exposes us to a risk of product liability claims that is inherent in the testing, manufacturing and marketing of medical devices.
We depend on clinical investigators and clinical sites to enroll patients in our clinical trials, and on other third parties to manage the trials and to perform related data collection and analysis, and, as a result, we may face costs and delays that are outside of our control.
Any failure to obtain regulatory approvals on a timely basis or the subsequent withdrawal of such approvals could prevent us from successfully marketing our products, which could adversely affect our business and operating results. 30 Table of Contents We depend on clinical investigators and clinical sites to enroll patients in our clinical trials, and on other third parties to manage the trials and to perform related data collection and analysis, and, as a result, we may face costs and delays that are outside of our control.
We conduct our annual indefinite-lived intangible assets impairment analysis during the fourth quarter of each year or when circumstances suggest that an indicator for impairment may be present. Previously, we performed a qualitative impairment analysis of the in-process research and development (“IPR&D”).
Previously, we recorded a non-cash indefinite-lived intangible and definite-lived assets impairment loss, which significantly impacted our results of operations, and we may be exposed to additional impairment losses that could be material. We conduct our annual indefinite-lived intangible assets impairment analysis during the fourth quarter of each year or when circumstances suggest that an indicator for impairment may be present.
Such measures include: hiring additional accounting personnel to ensure timely reporting of significant matters; 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; and designing and implementing formal processes, policies and procedures supporting our financial close process.
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; and designing and implementing formal processes, policies and procedures supporting our financial close process. General economic and political conditions could have a material adverse effect on our business.
We have identified material weaknesses in our internal control over financial reporting and any failure to maintain effective internal control over financial reporting, may have a material and adverse effect on our business, operating results, financial condition and prospects.
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; and designing and implementing formal processes, policies and procedures supporting our financial close process. 25 Table of Contents We have identified material weaknesses in our internal control over financial reporting and any failure to maintain effective internal control over financial reporting, may have a material and adverse effect on our business, operating results, financial condition and prospects.
In addition, our results of operations, financial position and cash flows could be materially adversely affected by changes under the Affordable Care Act and changes under any federal or state legislation adopted in the future. We are subject, directly or indirectly, to United States federal and state healthcare fraud and abuse and false claims laws and regulations.
In addition, our results of operations, financial position and cash flows could be materially adversely affected by changes under the Affordable Care Act and changes under any federal or state legislation adopted in the future. Public health crises, such as the COVID-19 pandemic, have had, and could in the future have, a negative effect on our business.
We had insufficient internal resources with appropriate accounting and finance knowledge and expertise to design, implement, document and operate effective internal controls around our financial reporting process. The insufficient internal resources resulted in a lack of review over our weighted average share calculation spreadsheet which included a formula error resulting in the inaccurate reporting of our earnings per share.
We had insufficient internal resources with appropriate accounting and finance knowledge and expertise to design, implement, document and operate effective internal controls around our financial reporting process. We are currently implementing our remediation plan to address the material weaknesses identified above.
We are a medical device company with a limited history of operations and sales, and we cannot assure you that we will ever generate substantial revenue or be profitable. We are a medical device company with a limited operating history upon which you can evaluate our business.
We cannot assure you that we will ever generate substantial revenue or be profitable.
Removed
Public health crises, such as the COVID-19 pandemic, have had, and could in the future have, a negative effect on our business.
Added
Risks Related to Our Business and Industry ● If we are unable to either substantially improve our operating results or obtain additional financing, we may be unable to continue as a going concern. ● Our current business strategy includes identifying strategic merger and acquisition alternatives.
Removed
Our success depends on the services of our senior management and other key employees.
Added
Merger and acquisition transactions are risky and may harm our business, reputation, operating results and financial condition. ● We have recently undertaken a cost reduction plan and reorganization, and may do so again in the future.
Removed
No Obalon directors, officers or employees continued with the Company which could hinder the ability to transfer the Obalon technology, restart manufacturing operations and maintain FDA regulatory compliance for the Obalon Balloon System and negatively impact our results of operations. Following the consummation of the merger, no directors, officers or employees of Obalon continued with ReShape.
Added
If our competitors are able to develop and market products that are safer or more effective than our products, our commercial opportunities will be reduced or eliminated. ● We face external competition from other technologies such as GLP-1’s and alternative medical procedures and we may not be able to compete effectively. ● Our ability to use net operating losses (“NOL”) carryforwards may be limited. ● Adverse developments affecting the financial services industry could adversely affect our current and projected business operations and our financial condition and results of operations.
Removed
In order to restart manufacturing of the Obalon Balloon System, ReShape would have to hire and train new personnel to appropriately perform manufacturing operations that meet required performance specifications and maintain quality system and regulatory compliance related to the Obalon Balloon System without the knowledge and expertise of the Obalon management team, including completing a FDA-mandated post-approval study which was halted due to the effects of COVID-19.
Added
Merger and acquisition transactions are risky and may harm our business, reputation, operating results and financial condition. ​ We have completed acquisitions and business combinations in the past and may complete merger and acquisition transactions in the future.
Removed
Obalon’s prior suppliers have not supplied Obalon since Obalon halted manufacturing and they may be unwilling or unable to supply ReShape on the prior terms or at all. Obalon had not manufactured or shipped products to customers since March 2020 and customers may not accept a relaunch of the Obalon Balloon System by ReShape.
Added
In December 2023, we announced that we engaged Maxim Group LLC to act as our exclusive financial advisor to identify potential strategic merger and acquisition partnership alternatives. We do not have a defined timeline for such a transaction and cannot provide any assurance whether or when any transaction will be announced or consummated.
Removed
Our lack of a significant operating history also limits your ability to make a comparative evaluation of us, our products and our prospects. Previously, we recorded a non-cash indefinite-lived intangible and definite-lived assets impairment loss, which significantly impacted our results of operations, and we may be exposed to additional impairment losses that could be material.
Added
Our ability to complete merger and acquisition transactions will depend, in part, on the availability of suitable candidates at acceptable prices, terms, and conditions; our ability to compete effectively for merger and acquisition candidates; and the availability of capital and personnel to complete such transactions.
Removed
We are currently implementing our remediation plan to address the material weaknesses identified above.
Added
Merger and acquisition transactions may involve a number of risks, the occurrence of which could adversely affect our business, reputation, operating results and financial condition, including: ​ ● diversion of management’s attention; ● disruption to our existing operations and plans; ● inability to effectively manage our expanded operations; ● difficulties or delays in integrating and assimilating information and financial systems, operations, manufacturing processes and products of an acquired business or other business venture or in realizing projected efficiencies, growth prospects, cost savings, and synergies; ● inability to successfully integrate or develop a distribution channel for acquired product lines; ● potential loss of key employees, customers, agents, distributors, or sales representatives of the acquired businesses or adverse effects on existing business relationships with suppliers, customers, agents, distributors, and sales representatives; ● reallocation of amounts of capital from other operating initiatives; ● violation of confidentiality, intellectual property and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate formal intellectual property protection mechanisms in place at an acquired business; ● inaccurate assessment of additional post-acquisition investments, undisclosed, contingent or other liabilities or problems, unanticipated costs associated with an acquisition, and an inability to recover or manage such liabilities and costs; ● incorrect estimates made in the accounting for acquisitions and incurrence of non-recurring charges; and ● write-off of significant amounts of goodwill or other assets as a result of deterioration in the performance of an acquired business or product line, adverse market conditions, changes in the competitive landscape, changes in laws or regulations that restrict activities of an acquired business or product line, or as a result of a variety of other circumstances. ​ ​ 23 Table of Contents We have recently undertaken a cost reduction plan and reorganization, and may do so again in the future.
Removed
Such measures include: hiring additional accounting personnel to ensure timely reporting of significant matters; 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; and designing and implementing formal processes, policies and procedures supporting our financial close process.

… 40 more changes not shown on this page.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+2 added−3 removed0 unchanged
Removed
ITEM 3. LEGAL PROCEEDINGS On August 6, 2021, Cowen and Company, LLC (“Cowen”) 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.
Added
ITEM 3. LEGAL PROCEEDINGS The Company is not currently a party to any material litigation and 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.
Removed
The complaint alleged 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.
Added
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 4. MINE SAFETY DISCLOSURES Not applicable. PART II.
Removed
On December 6, 2022, the Court granted Cowen’s motion for summary judgment and directed ReShape to pay Cowen the principal amount of $1.35 million, plus interest at the statutory rate of 9% per annum from June 16, 2021, and to reimburse Cowen’s attorneys’ fees. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed0 unchanged
Biggest changeNumber of Stockholders As of April 14, 2023, there were approximately 33 holders of record of our common stock. 40 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item regarding equity compensation plans is incorporated by reference to the information set forth in Part III, Item 12 of this Annual Report on Form 10-K.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans The information required by this Item regarding equity compensation plans is incorporated by reference to the information set forth in Part III, Item 12 of this Annual Report on Form 10-K. Unregistered Sales of Equity Securities None, except as previously disclosed. Uses of Proceeds from Sale of Registered Securities None.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUIT Y, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on the Nasdaq under the symbol “RSLS”.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUIT Y, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on the Nasdaq under the symbol “RSLS”. 39 Table of Contents Number of Stockholders As of March 26, 2024, there were approximately 34 holders of record of our common stock.
Unregistered Sales of Equity Securities None, except as previously disclosed. Uses of Proceeds from Sale of Registered Securities None. Dividend Policy We have never paid cash dividends on our common stock. The board of directors presently intends to retain all earnings for use in our business and does not anticipate paying cash dividends in the foreseeable future.
Dividend Policy We have never paid cash dividends on our common stock. The board of directors presently intends to retain all earnings for use in our business and does not anticipate paying cash dividends in the foreseeable future. We do not have a dividend reinvestment plan or a direct stock purchase plan.
We do not have a dividend reinvestment plan or a direct stock purchase plan. Issuer Purchases of Equity Securities None. ​ ITEM 6. [RESERVED] ​ 41 Table of Contents
Issuer Purchases of Equity Securities None. ​ ITEM 6. [RESERVED] ​ 40 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

33 edited+18 added−34 removed15 unchanged
Biggest changeFinancial Overview Results of Operations The following table sets forth certain data from our operating results from the years ended December 31, 2022 and 2021, expressed as percentages of net revenue (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ As Restated ​ Revenue $ 11,240 ​ 100.0 % ​ $ 13,600 ​ 100.0 % Cost of revenue ​ 4,438 ​ 39.5 % ​ ​ 5,252 ​ 38.6 % Gross profit ​ 6,802 ​ 60.5 % ​ ​ 8,348 ​ 61.4 % Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing ​ 14,093 ​ 125.4 % ​ ​ 8,893 ​ 65.4 % General and administrative ​ 17,250 ​ 153.5 % ​ ​ 24,319 ​ 178.8 % Research and development ​ 2,537 ​ 22.6 % ​ ​ 2,369 ​ 17.4 % Impairment of intangible assets and goodwill ​ 18,744 ​ 166.8 % ​ ​ 30,649 ​ 225.4 % Loss on disposal of assets, net ​ 529 ​ 4.7 % ​ ​ — ​ — % Total operating expenses ​ 53,153 ​ 473.0 % ​ ​ 66,230 ​ 487.0 % Operating loss ​ (46,351) ​ (412.4) % ​ ​ (57,882) ​ (425.6) % Other expense (income), net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense, net ​ 113 ​ 1.0 % ​ ​ 832 ​ 6.1 % Warrant expense ​ — ​ — % ​ ​ 2,813 ​ 20.7 % Loss on extinguishment of debt, net ​ — ​ — % ​ ​ 2,061 ​ 15.2 % Loss (gain) on foreign currency exchange, net ​ 141 ​ 1.3 % ​ ​ (168) ​ (1.2) % Other ​ (11) ​ (0.1) % ​ ​ — ​ — % Loss before income tax provision ​ (46,594) ​ (414.6) % ​ ​ (63,420) ​ (466.3) % Income tax benefit ​ (380) ​ (3.4) % ​ ​ (274) ​ (2.0) % Net loss $ (46,214) ​ (411.3) % ​ $ (63,146) ​ (464.3) % Non-GAAP Disclosures In addition to the financial information prepared in conformity with GAAP, we provide certain historical non-GAAP financial information.
Biggest changeFinancial Overview Results of Operations The following table sets forth certain data from our operating results from the years ended December 31, 2023 and 2022, expressed as percentages of net revenue (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ ​ 2022 ​ Revenue $ 8,678 ​ 100.0 % ​ $ 11,240 ​ 100.0 % Cost of revenue ​ 3,130 ​ 36.1 % ​ ​ 4,438 ​ 39.5 % Gross profit ​ 5,548 ​ 63.9 % ​ ​ 6,802 ​ 60.5 % Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales and marketing ​ 7,548 ​ 87.0 % ​ ​ 14,093 ​ 125.4 % General and administrative ​ 10,324 ​ 119.0 % ​ ​ 17,250 ​ 153.5 % Research and development ​ 2,315 ​ 26.7 % ​ ​ 2,537 ​ 22.6 % Impairment of long-lived assets ​ 777 ​ 9.0 % ​ ​ 18,744 ​ 166.8 % (Gain) loss on disposal of assets, net ​ (33) ​ (0.4) % ​ ​ 529 ​ 4.7 % Total operating expenses ​ 20,931 ​ 241.3 % ​ ​ 53,153 ​ 473.0 % Operating loss ​ (15,383) ​ (177.4) % ​ ​ (46,351) ​ (412.5) % Other expense (income), net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest (income) expense, net ​ (26) ​ (0.3) % ​ ​ 113 ​ 1.0 % Gain on changes in fair value of liability warrants ​ (3,878) ​ (44.7) % ​ ​ — ​ — % (Gain) loss on foreign currency exchange, net ​ (22) ​ (0.3) % ​ ​ 141 ​ 1.3 % Other ​ (122) ​ (1.4) % ​ ​ (11) ​ (0.1) % Loss before income tax provision ​ (11,335) ​ (130.7) % ​ ​ (46,594) ​ (414.7) % Income tax expense (benefit) ​ 52 ​ 0.6 % ​ ​ (380) ​ (3.4) % Net loss $ (11,387) ​ (131.2) % ​ $ (46,214) ​ (411.2) % 41 Table of Contents Non-GAAP Disclosures In addition to the financial information prepared in conformity with GAAP, we provide certain historical non-GAAP financial information.
Net Cash Provided by Financing Net cash provided by financing activities was $3.1 million for the year ended December 31, 2022, primarily due to proceeds of $2.5 million received from the exercises of warrants from an institutional investor and $0.6 million of securities sold to an institutional investor.
Net cash provided by financing activities was $3.1 million for the year ended December 31, 2022, primarily due to proceeds of $2.5 million received from the exercises of warrants from an institutional investor and $0.6 million of securities sold to an institutional investor.
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, clinical and product development activities.
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.
While our significant accounting policies are more fully described in Note 4 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies and estimates are most critical to a full understanding and evaluation of our reported financial results.
While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, we believe that the following accounting policies and estimates are most critical to a full understanding and evaluation of our reported financial results.
Therefore, investors 43 Table of Contents should consider non-GAAP financial measures in addition to, and not as 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.
Therefore, investors should consider non-GAAP financial measures in addition to, and not as 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.
We show a negative cash impact to inventory of $1.2 million and warranty liability of $0.4 million. This was offset by a positive impact to accounts receivable of $0.7 million, prepaid expenses of $1.1 million and accounts payable and accrued liabilities of $0.5 million.
We show a negative 44 Table of Contents cash impact to inventory of $1.2 million and warranty liability of $0.4 million. This was offset by a positive impact to accounts receivable of $0.7 million, prepaid expenses of $1.1 million and accounts payable and accrued liabilities of $0.5 million.
Our future capital requirements will depend on many factors, including, but not limited to, the following: ● the cost and timing of establishing sales, marketing and distribution capabilities; ● the cost of establishing clinical and commercial supplies of our Diabetes Bloc-Stim Neuromodulation, and any products that we may develop; ● the rate of market acceptance of our Diabetes Bloc-Stim Neuromodulation, and any other product candidates; ● the cost of filing and prosecuting patent applications and defending and enforcing our patent and other intellectual property rights; ● the cost of defending, in litigation or otherwise, any claims that we infringe third-party patent or other intellectual property rights; ● the effect of competing products and market developments; ● the cost of explanting clinical devices; ● the terms and timing of any collaborative, licensing or other arrangements that we may establish; ● any revenue generated by sales of our L ap -B and , ReShapeCare, ReShape Marketplace, Obalon Balloon System, Diabetes Bloc-Stim Neuromodulation or our future products; ● the scope, rate of progress, results and cost of our clinical trials and other research and development activities; ● the cost and timing of obtaining any further required regulatory approvals; and ● the extent to which we invest in products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.
Our future capital requirements will depend on many factors, including, but not limited to, the following: ● the cost and timing of establishing sales, marketing and distribution capabilities; ● the cost of establishing clinical and commercial supplies of our DBNS, and any products that we may develop; ● the rate of market acceptance of our DBNS, and any other product candidates; ● the cost of filing and prosecuting patent applications and defending and enforcing our patent and other intellectual property rights; ● the cost of defending, in litigation or otherwise, any claims that we infringe third-party patent or other intellectual property rights; ● the effect of competing products and market developments; 45 Table of Contents ● the cost of explanting clinical devices; ● the terms and timing of any collaborative, licensing or other arrangements that we may establish; ● any revenue generated by sales of our L ap -B and , Obalon Balloon System, DBNS or our future products; ● the scope, rate of progress, results and cost of our clinical trials and other research and development activities; ● the cost and timing of obtaining any further required regulatory approvals; and ● the extent to which we invest in products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.
Stock-based awards consist of stock options and restricted stock units. The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The Black-Scholes models require various highly judgmental assumptions, including stock price volatility, risk-free interest rate, and expected option term. Stock-based compensation expense is recorded net of estimated forfeitures.
The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The Black-Scholes models require various highly judgmental assumptions, including stock price volatility, risk-free interest rate, and expected option term. Stock-based compensation expense is recorded net of estimated forfeitures.
There has been no revenue recorded for the Obalon Balloon System, and there has been no revenue recorded for the ReShape Vest or the Diabetes Bloc-Stim Neuromodulation as these products are still in the development stage.
There has been no revenue recorded for the Obalon Balloon System, or the Diabetes Bloc-Stim Neuromodulation as these products are still in the development stage.
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.
Because of the numerous risks and uncertainties associated with the development of medical devices, such as our DBSN, we are unable to estimate the exact amounts of capital outlays and operating expenditures necessary to complete the development of the DBNS or other additional products and successfully deliver a commercial product to the market.
Gross profit for the year ended December 31, 2022, was $6.8 million, compared to $8.3 million for the year ended December 31, 2021, a decrease of $1.5 million or 18.5%. Gross profit as a percentage of revenue for the year ended December 31, 2022, was 60.5% compared to 61.4% for the same period in 2021.
Gross profit for the year ended December 31, 2023, was $5.5 million, compared to $6.8 million for the year ended December 31, 2022, a decrease of $1.3 million or 18.4%. Gross profit as a percentage of revenue for the year ended December 31, 2023, was 63.9% compared to 60.5% for the same period in 2022.
The Company incurred multiple impairments charges totaling $18.7 million for the year ended December 31, 2022. The Company recorded an impairment charge of $7.4 million of in-process IPR&D and trademarks related to the ReShape Vest due to the Company no longer continuing with clinical trials.
During the year ended December 31, 2022, the Company recorded an impairment charge of $7.4 million of in-process IPR&D and trademarks related to the ReShape Vest due to the Company no longer continuing with clinical trials.
Net Cash Used in Investing Activities Net cash used in investing activities for the year ended December 31, 2022, was $0.1 million, primarily related to tooling equipment.
Net Cash Used in Investing Activities Net cash used in investing activities for the year ended December 31, 2023, was insignificant as the Company was focused on preserving cash. Net cash used in investing activities for the year ended December 31, 2022, was $0.1 million, primarily related to tooling equipment.
The preparation of these financial statements requires us to make estimates and 48 Table of Contents assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported expenses during the reporting periods.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis.
A valuation allowance for deferred income tax assets is recorded when it is more likely than not that some portion or all of the deferred income tax assets will not be realized.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance for deferred income tax assets is recorded when it is more likely than not that some portion or all of the deferred income tax assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred 46 Table of Contents tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The following table summarizes our net revenue by geographic location based on the location of customers for the years ended December 31, 2022 and 2021, as well as the percentage by location of total revenue and the amount of change and percentage of change (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Amount ​ Percentage ​ ​ 2022 ​ ​ 2021 ​ ​ Change ​ Change ​ United States $ 9,230 ​ 82.2 % ​ $ 10,297 ​ 75.7 % ​ $ (1,067) ​ (10.4) % Australia ​ 688 ​ 6.1 % ​ ​ 1,039 ​ 7.6 % ​ ​ (351) ​ (33.8) % Europe ​ 1,252 ​ 11.1 % ​ ​ 2,127 ​ 15.7 % ​ ​ (875) ​ (41.1) % Rest of world ​ 70 ​ 0.6 % ​ ​ 137 ​ 1.0 % ​ ​ (67) ​ (48.9) % Total revenue $ 11,240 ​ 100.0 % ​ $ 13,600 ​ 100.0 % ​ $ (2,360) ​ (17.4) % Revenue totaled $11.2 million for the year ended December 31, 2022, which represents a contraction of 17.4%, or $2.4 million compared to the same period in 2021.
The following table summarizes our net revenue by geographic location based on the location of customers for the years ended December 31, 2023 and 2022, as well as the percentage by location of total revenue and the amount of change and percentage of change (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Amount ​ Percentage ​ ​ 2023 ​ ​ 2022 ​ ​ Change ​ Change ​ United States $ 7,134 ​ 82.2 % ​ $ 9,230 ​ 82.2 % ​ $ (2,096) ​ (22.7) % Australia ​ 526 ​ 6.1 % ​ ​ 688 ​ 6.1 % ​ ​ (162) ​ (23.5) % Europe ​ 956 ​ 11.0 % ​ ​ 1,252 ​ 11.1 % ​ ​ (296) ​ (23.6) % Rest of world ​ 62 ​ 0.7 % ​ ​ 70 ​ 0.6 % ​ ​ (8) ​ (11.4) % Total revenue $ 8,678 ​ 100.0 % ​ $ 11,240 ​ 100.0 % ​ $ (2,562) ​ (22.8) % 42 Table of Contents Revenue totaled $8.7 million for the year ended December 31, 2023, which represents a contraction of 22.8%, or $2.6 million compared to the same period in 2022.
As of December 31, 2022, we had $3.9 million of cash and cash equivalents, and $100 thousand of restricted cash. 46 Table of Contents The following table summarizes our change in cash and cash equivalents (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2022 2021 ​ ​ ​ ​ ​ As Restated Net cash used in operating activities ​ $ (21,902) ​ $ (15,375) Net cash (used in) provided by investing activates ​ ​ (92) ​ ​ 1,855 Net cash provided by financing activities ​ 3,130 ​ 33,299 Effect of exchange rate changes ​ ​ 4 ​ ​ 29 Net change in cash and cash equivalents and restricted cash ​ $ (18,860) ​ $ 19,808 Net Cash Used in Operating Activities Net cash used in operating activities was $21.9 million and $15.4 million for the years ended December 31, 2022 and 2021, respectively.
The following table summarizes our change in cash and cash equivalents (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 2022 Net cash used in operating activities ​ $ (16,960) ​ $ (21,902) Net cash used in investing activates ​ ​ (10) ​ ​ (92) Net cash provided by financing activities ​ 17,574 ​ 3,130 Effect of exchange rate changes ​ ​ — ​ ​ 4 Net change in cash and cash equivalents and restricted cash ​ $ 604 ​ $ (18,860) Net Cash Used in Operating Activities Net cash used in operating activities was $17.0 million and $21.9 million for the years ended December 31, 2023 and 2022, respectively.
The Company’s anticipated operations include plans to (i) 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, (ii) introduce to the market place ReShapeCare and ReShape Marketplace as an extension, (iii) ramp up a focused approach of marketing to increase brand recognition, create customer awareness and increase the patient demand, (iv) continue development of the DBSN device, (v) seek opportunities to leverage our intellectual property portfolio and custom development services to provide third-party sales and licensing opportunities, and (vi) explore and capitalize on synergistic opportunities to expand our portfolio and offer future minimally invasive treatments and therapies in the obesity continuum of care, including Lap-Band 2.0 and the Obalon Balloon System.
Operating Capital and Capital Expenditure Requirements The Company’s anticipated operations include plans to (i) 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, (ii) introduce to the market Lap-Band 2.0 FLEX, (iii) continue development of the Diabetes Bloc-Stim Neuromodulation (“DBSN”) device, (vi) identifying strategic merger and acquisition alternatives, (v) seek opportunities to find strategic partners to leverage our intellectual property portfolio and custom development services to provide third-party sales and licensing opportunities, and (vi) explore and capitalize on synergistic opportunities to expand our portfolio and offer future minimally invasive treatments and therapies in the obesity continuum of care.
We evaluate our estimates and judgments on an ongoing basis. Actual results may differ materially from these estimates under different assumptions or conditions.
Actual results may differ materially from these estimates under different assumptions or conditions.
Sales and marketing expenses for the year ended December 31, 2022, increased by $5.2 million, or 58.5%, to $14.1 million, compared to $8.9 million for the year ended December 31, 2021.
Sales and marketing expenses for the year ended December 31, 2023, decreased by $6.6 million, or 46.8%, to approximately $7.5 million, compared to $14.1 million for the same period in 2022.
Our current portfolio includes the Lap-Band Adjustable Gastric Banding System, the ReShapeCare virtual health coaching program, the ReShape Marketplace, the Obalon Balloon System, and the Diabetes Bloc-Stim Neuromodulation device, a technology under development as a new treatment for type 2 diabetes mellitus.
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.
General and administrative expenses for the year ended December 31, 2022, decreased by $7.1 million, or 28.5%, to $17.4 million, compared to $24.3 million for the year ended December 31, 2021.
General and administrative expenses for the year ended December 31, 2023, decreased by approximately $7.0 million, or 40.2%, to approximately $10.3 million, compared to $17.3 million for the same period in 2022.
This resulted in a significant impact within the United States and throughout Europe. 44 Table of Contents Cost of Revenue and Gross Profit: The following table summarizes our cost of goods sold and gross profit for the years ended December 31, 2022 and 2021, as well as percentage of total revenue and the amount of change and percentage of change (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Amount ​ Percentage ​ ​ 2022 ​ ​ 2021 ​ ​ Change ​ Change ​ Revenue $ 11,240 ​ 100.0 % ​ $ 13,600 ​ 100.0 % ​ $ (2,360) ​ (17.4) % Cost of revenue ​ 4,438 ​ 39.5 % ​ ​ 5,252 ​ 38.6 % ​ ​ (814) ​ (15.5) % Gross profit $ 6,802 ​ 60.5 % ​ $ 8,348 ​ 61.4 % ​ $ (1,546) ​ (18.5) % Gross profit.
Cost of Revenue and Gross Profit: The following table summarizes our cost of goods sold and gross profit for the years ended December 31, 2023 and 2022, as well as percentage of total revenue and the amount of change and percentage of change (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Amount ​ Percentage ​ ​ 2023 ​ ​ 2022 ​ ​ Change ​ Change ​ Revenue $ 8,678 ​ 100.0 % ​ $ 11,240 ​ 100.0 % ​ $ (2,562) ​ (22.8) % Cost of revenue ​ 3,130 ​ 36.1 % ​ ​ 4,438 ​ 39.5 % ​ ​ (1,308) ​ (29.5) % Gross profit $ 5,548 ​ 63.9 % ​ $ 6,802 ​ 60.5 % ​ $ (1,254) ​ (18.4) % Gross profit.
During the year ended December 31, 2022, the Company disposed of $0.5 million, primarily of assets that were acquired from the merger with Obalon. Net Interest Expense. Net interest expense for the year ended December 31, 2022, of $0.1 million primarily relates to interest accrued regarding a litigation ruling.
(Gain) loss on disposal of assets, net. During 2023, the Company had a gain of approximately $33 thousand related to the sale of fully depreciated assets. During the year ended December 31, 2022, the Company disposed of $0.5 million, primarily of assets that were acquired from the merger with Obalon.
During the years ended December 31, 2022 and 2021, we received proceeds of $3.1 million and $45.6 million, respectively, from securities sales and exercises of warrants by an institutional investor, and $1.0 million during 2021, from the credit agreement with an institutional investor.
Liquidity and Capital Resources We have financed our operations to date principally through the sale of equity securities and debt financings. During the years ended December 31, 2023 and 2022, we received proceeds of $17.6 million and $3.1 million, respectively, from securities sales and exercises of warrants by an institutional investor.
The following table contains a reconciliation of GAAP net loss to non-GAAP net loss attributable to common stockholders for the years ended December 31, 2022 and 2021 (in thousands). ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 ​ 2021 ​ ​ ​ ​ As Restated GAAP net loss $ (46,214) ​ $ (63,146) Adjustments: ​ ​ ​ ​ ​ Interest expense, net ​ 113 ​ ​ 832 Income tax benefit ​ (380) ​ ​ (274) Depreciation and amortization ​ 2,153 ​ ​ 1,971 Stock-based compensation expense ​ 2,087 ​ ​ 12,227 Impairment of intangible assets and goodwill ​ 18,744 ​ ​ 30,649 Loss on disposal of assets, net ​ 529 ​ ​ — Loss on extinguishment of debt, net ​ — ​ ​ 2,061 Warrant expense ​ — ​ ​ 2,813 Professional fees incurred in connection with the Obalon merger ​ — ​ ​ 2,277 Non-GAAP loss $ (22,968) ​ $ (10,590) Comparison of Results of Operations Revenue.
The following table contains a reconciliation of GAAP net loss to non-GAAP net loss attributable to common stockholders for the years ended December 31, 2023 and 2022 (in thousands). ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 ​ 2022 GAAP net loss $ (11,387) ​ $ (46,214) Adjustments: ​ ​ ​ ​ ​ Interest (income) expense, net ​ (26) ​ ​ 113 Income tax expense (benefit) ​ 52 ​ ​ (380) Depreciation and amortization ​ 154 ​ ​ 2,153 Stock-based compensation expense ​ 767 ​ ​ 2,087 Impairment of long-lived assets ​ 777 ​ ​ 18,744 (Gain) loss on disposal of assets, net ​ (33) ​ ​ 529 Gain on changes in fair value of liability warrants ​ (3,878) ​ ​ — Adjusted EBITDA $ (13,574) ​ $ (22,968) Comparison of Results of Operations Revenue.
Operating Expenses: The following table summarizes our operating expenses for the years ended December 31, 2022 and 2021, as well as the percentage of total revenue, and the amount of changes and percentage of change (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Amount ​ Percentage ​ ​ 2022 ​ ​ 2021 ​ ​ Change ​ Change ​ ​ ​ ​ ​ ​ ​ ​ As Restated ​ ​ ​ ​ ​ ​ ​ Sales and marketing $ 14,093 ​ 125.4 % ​ $ 8,893 ​ 65.4 % ​ $ 5,200 ​ 58.5 % General and administrative ​ 17,250 ​ 153.5 % ​ ​ 24,319 ​ 178.8 % ​ ​ (7,069) ​ (29.1) % Research and development ​ 2,537 ​ 22.6 % ​ ​ 2,369 ​ 17.4 % ​ ​ 168 ​ 7.1 % Impairment of intangible assets and goodwill ​ 18,744 ​ 166.8 % ​ ​ 30,649 ​ 225.4 % ​ ​ (11,905) ​ (38.8) % Loss on disposal of assets, net ​ 529 ​ 4.7 % ​ ​ — ​ — % ​ ​ 529 ​ 100.0 % Total operating expenses $ 53,153 ​ 473.0 % ​ $ 66,230 ​ 487.0 % ​ $ (13,077) ​ (19.7) % Sales and Marketing Expense.
Operating Expenses: The following table summarizes our operating expenses for the years ended December 31, 2023 and 2022, as well as the percentage of total revenue, and the amount of changes and percentage of change (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Amount ​ Percentage ​ ​ 2023 ​ ​ 2022 ​ ​ Change ​ Change ​ Sales and marketing $ 7,548 ​ 87.0 % ​ $ 14,093 ​ 125.4 % ​ $ (6,545) ​ (46.4) % General and administrative ​ 10,324 ​ 119.0 % ​ ​ 17,250 ​ 153.5 % ​ ​ (6,926) ​ (40.2) % Research and development ​ 2,315 ​ 26.7 % ​ ​ 2,537 ​ 22.6 % ​ ​ (222) ​ (8.8) % Impairment of long-lived assets ​ 777 ​ 9.0 % ​ ​ 18,744 ​ 166.8 % ​ ​ (17,967) ​ (95.9) % (Gain) loss on disposal of assets, net ​ (33) ​ (0.4) % ​ ​ 529.0 ​ 4.7 % ​ ​ (562) ​ (106.2) % Total operating expenses $ 20,931 ​ 241.3 % ​ $ 53,153 ​ 472.9 % ​ $ (32,222) ​ (60.6) % ​ Sales and Marketing Expense.
Net cash used in operating activities for the year ended December 31, 2021, was primarily the result of our net loss of $63.1 million, partially offset by non-cash adjustments for loss on impairment of intangible assets and goodwill of $30.7 million, stock-based compensation expense of $12.2 million, amortization of intangible assets of $1.7 million, net loss on extinguishment of debt of $2.1 million, warrant expense of $2.8 million and amortization of debt discount of $0.5 million, offset by non-cash reductions of expense for deferred taxes of $0.2 million.
For the year ended December 31, 2023, net cash used in operating activities was primarily the result of our net loss of $11.4 million, partially offset by non-cash adjustments of loss on impairment of long-lived asset of $0.8 million, stock-based compensation expense of $0.8 million, provision for bad debt expense of $0.4 million, provision for excess and obsolete inventory of $0.3 million, depreciation expense of $0.1 million, offset by non-cash reductions of expense non-cash gains recognized related to changes in fair value of liability warrants of 3.9 million.
The Company’s policy is to classify interest and penalties related to income taxes as income tax expense in the consolidated statements of operations. 49 Table of Contents Recent Accounting Pronouncements See Note 4 to the Consolidated Financial Statements, for a discussion of new accounting standards that have been adopted and those not yet adopted. ​
The Company’s policy is to classify interest and penalties related to income taxes as income tax expense in the consolidated statements of operations.
The impairment reviews require significant estimates about fair value, including estimation of future cash flows, selection of an appropriate discount rate, and estimates of long-term growth rates. Acquisition The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations.
The impairment reviews require significant estimates about fair value, including estimation of future cash flows, selection of an appropriate discount rate, and estimates of long-term growth rates. Stock-based Compensation We measure and recognize compensation expenses for all stock-based awards based on estimated fair values. Stock-based awards consist of stock options and restricted stock units.
In addition, there was a reduction in audit, consulting and professional fees of $1.6 million, as we had higher costs during 2021 due to the merger with Obalon. This was offset by an increase of legal expense of $2.6 million, primarily related to recording litigation settlements of $2.7 million during 2022.
This was offset by an increase in audit and professional services of approximately $1.2 million, primarily due to the offerings we completed during 2023. 43 Table of Contents Research and Development Expense.
Research and development expenses for the year ended December 31, 2022 increased by $0.2 million, or 7.3% to $2.5 million, compared to $2.3 million for the year ended December 31, 2021 primarily due to an increase in consulting and professional services related to the development of ReShape’s Diabetes Bloc-Stim Neuromodulation device and payroll related expenditures. 45 Table of Contents Loss on Impairment of Intangible Assets and Goodwill .
Research and development expenses for the year ended December 31, 2023, decreased by $0.2 million, or 8.8%, to $2.3 million, compared to $2.5 million for the same period in 2022.
Removed
Our primary operations are in the following geographical areas: United States, Australia and certain European and Middle Eastern countries.
Added
Recent Developments In February 2024, the Company announced the first surgeries utilizing the Lap-Band 2.0 FLEX mark, not only a seminal moment in the Company’s launch of this enhanced product, but also a leap forward in improving the Lap-Band.
Removed
Restatement of Previously Issued Financial Statements The accompanying Management’s Discussion and Analysis of Financial Overview and Results of Operations gives effect to the restatement of the Company’s previously reported consolidated financial statements for the year ended December 31, 2021. The Company has restated the consolidated financial statements for the year ended December 31, 2021.
Added
The primary reason for the decrease is due to the introduction of GLP-1 pharmaceuticals within the US. This is also evidenced by a decrease of Lap-Band unit sales of approximately 26.8%.
Removed
This restatement related to the Company incorrectly capitalizing a D&O tail insurance policy and other immaterial out of period corrections for stock based compensation expense, legal accruals and tax valuation allowances related to the impairment of certain assets.
Added
The increase in gross profit margin is primarily due to the Company allocating resources that were previously primarily focused on inventory to other projects and allocated a larger percentage of these costs to operating expenses in 2023.
Removed
For additional information and a detailed discussion of the restatement, see Note 2 in the notes to our consolidated financial statements included in this Annual Report on Form 10-K.
Added
The decrease is primarily due to a decrease of $5.2 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 significant reduction of costs.
Removed
Restatement adjustments have also been made to the previously reported unaudited consolidated financial statements for the interim periods ended September 30, 2022, June 30, 2022, March 31, 2022, September 30, 2021, and June 30, 2021.
Added
We also had reductions in payroll expenditures, including commissions, travel and stock-based compensation of $1.2 million, due to changes in sales personnel and lower sales. General and Administrative Expense.
Removed
For additional information related to the interim period restatements, see Note 2 and Note 3 in the notes or our consolidated financial statements included in the Annual Report on Form 10-K. Recent Developments On February 16, 2022, the Company renewed the office space lease in San Clemente, California for one year.
Added
The decrease is primarily due to a reduction in legal related expenses due to the Company recording $2.6 million in litigation losses during the year ended December 31, 2022. In addition, the Company had a reduction in payroll related expenses including stock-based compensation expense of $2.8 million, due to changes within personnel.
Removed
This lease renewal will commence on July 1, 2022, and end on June 30, 2023.
Added
We had a decrease in intangible asset amortization of $1.8 million, as we impaired our finite intangible assets during the fourth quarter of 2022. We also had a decrease in rent and insurance of $0.7 million due to the lease of our former Carlsbad, CA location expiring. We also had a decrease of $0.3 million related to non-income taxes.
Removed
On March 13, 2023 we entered into a lease for approximately 5,038 square feet of office/warehouse space at 18 Technology Drive, Suite 110, Irvine, California 92618 and intend to relocate our principal executive offices from our current San Clemente, California location to the Irvine, California location.
Added
The decrease is primarily due to a decrease of $0.1 million in payroll expenses, as the Company’s revenue declined, the Company allocated personnel’s time to other research and development projects to utilize the employees and a reduction of depreciation expense of $0.1 million as the Company impaired its fixed assets during 2023. Impairment of Long-Lived Assets.
Removed
The Irvine California lease has a term of 36 months commencing on May 1, 2023. On September 16, 2022, the Company was awarded $300 thousand, Small Business Innovation Research grant for the development of ReShape’s Diabetes Bloc-Stim Neuromodulation device.
Added
Impairment of long-lived assets decreased by approximately $18.0 million for the year ended December 31, 2023, compared to the same period in the prior year. During the year ended December 31, 2023, the Company impaired approximately $0.8 million, consisting of fixed assets and intangible assets.
Removed
This device utilizes its proprietary vagus nerve block (vBloc) technology platform, combined with vagus nerve stimulation, for the treatment of Type 2 diabetes and metabolic disorders. Specifically, the grant will fund development of the device for the treatment hypoglycemia. On July 27, 2022, the Company announced that its Board of Directors has appointed Paul F.
Added
As of December 31, 2023, we had $4.5 million of cash and cash equivalents, and $100 thousand of restricted cash.
Removed
Hickey as President and Chief Executive Officer and a member of the Board of Directors, effective August 15, 2022. Mr. Hickey succeeds 42 Table of Contents Bart Bandy, who has separated from the Company to pursue other opportunities. Thomas Stankovich, Chief Financial Officer of the Company, served as Interim President and Chief Executive Officer until Mr. Hickey joined the Company.
Added
This was offset by a positive impact to accounts receivable of $0.1 million and a negative impact to cash from inventory of $0.5 million, prepaid expenses of $0.2 million and accounts payable and accrued liabilities of $3.5 million and a decrease in warranty liabilities of $0.2 million.
Removed
Dan W. Gladney, current Chair of the Board of Directors, assumed a more active role as Executive Chair, supporting Mr. Hickey and the Company on strategic matters.
Added
Net cash used in operating activities was $21.9 million and $15.4 million for the years ended December 31, 2022 and 2021, respectively.
Removed
On February 8, 2023, the Company closed a public offering of 1,275,000 units, with each consisting of one share of its common stock, or one pre-funded warrant to purchase one share of its common stock, and one warrant to purchase one-half shares of its common stock. Each unit was sold at public offering price of $8.00.
Added
Net Cash Provided by Financing Net cash provided by financing activities was $17.6 million for the year ended December 31, 2023, as the Company completed multiple public offerings with proceeds of approximately $13.5 million and $4.1 million of warrants exercised during 2023.
Removed
The warrants in the units are immediately exercisable at a price of $8.00 per share (or pursuant to the “alternative cashless exercise” provision described above) and expire five years from the date of issuance. Gross proceeds, before deducting underwriting discounts and commissions and estimated offering expenses, are approximately $10.2 million.
Added
If managements’ plans don’t develop, and the Company doesn’t get additional cash raises, at the current burn rate, management expects to run out of cash during the third quarter of 2024.
Removed
The primary reason for the decrease, is due to the emergence in late 2021 of the fast-spreading omicron variants of COVID-19 resulting in a significant rise in global cases causing a significant number of bariatric centers to close December 2021 through February 2022, as the omicron variant began to subside.
Added
Accounts Receivable Reserve The Company provides reserves against accounts receivable for estimated losses that may result from a customer’s inability to pay based on customer-specific analysis and general matters such as current assessments of past due balances, economic conditions and forecasts, and historical credit loss activity. Amounts determined to be uncollectible are charged or written-off against the reserve.
Removed
The decrease in gross profit margin is primarily due to a decrease in sales, as revenue decrease by 17.4%, with the largest decrease of revenue in the United States, which has a higher margin than international.
Added
Additionally, under the current expected credit loss model, we utilize historical loss rates based on number of days past due, adjusted to reflect current economic conditions and forecasts of future economic conditions. Inventory Reserve The Company establishes inventory reserves for obsolescence based upon specific identification of expired or unusable units with a corresponding provision included in cost of revenue.
Removed
The increase is primarily due to an increase in advertising and marketing costs of $3.9 million, as the Company launched its direct to consumer campaign during the fourth quarter of 2021 and expanded this campaign during the first half of 2022.
Added
Fair Value of Warrants We analyze warrants to determine if the warrant instrument should be treated as a liability or equity. Based on the outcome of this analysis, we measure the fair value of the instrument using a Black-Scholes valuation model, bifurcated Black-Scholes valuation model or a Monte Carlo valuation model.
Removed
In addition, we had an increase in payroll related and travel expenses of $1.3 million, as we continue to strengthen our commercial organization and have hired a Senior VP of Commercial Operations, as well as additional sales personnel. There was an increase in consulting and professional services of $0.9 million, as we are working on developing the ReShapeCare platform.
Added
Each of these models require various highly judgmental assumptions, including stock price volatility, risk-free interest rate, and expected term. Recent Accounting Pronouncements See Note 2 to the Consolidated Financial Statements, for a discussion of new accounting standards that have been adopted and those not yet adopted. ​
Removed
This was offset by a decrease of stock based compensation expense of $0.6 million, as during the third quarter of 2021, the Company issued both RSUs and stock options that contained a look back provision and a decrease in commissions of $0.3 million due to a reduction in sales. General and Administrative Expense.
Removed
The decrease is primarily due to a decrease of $8.7 million in stock-based compensation expense, as during the third quarter of 2021, the Company issued both RSUs and stock options containing a look back provision.
Removed
Additionally, there was an increase in payroll related costs of $0.5 million due to personnel changes and an increase in rent of $0.1 million due to the additional facility and extending the corporate lease. Research and Development Expense.
Removed
The Company incurred two impairment charges totaling $30.7 million during the year ended December 31, 2021. The Company recorded a goodwill impairment charge of $23.5 million due to a reduction in our market capitalization at year end.
Removed
In addition, an impairment charge of $7.2 million was recorded, due to a reduction in our market capitalization coupled with the effects of the delays in the ReShape Vest clinical trials from the COVID-19 pandemic thus reducing the near-term future net cash flows. Loss on Disposal of Assets, net.
Removed
Net interest expense for the year ended December 31, 2021, of $0.8 million primarily relates to the debt that was extinguished during the second quarter of 2021. Warrant Expense . Warrant expense was $2.8 million for the year ended December 31, 2021.
Removed
The warrant expense relates to the issuance of warrants and common stock in connection with the exchange agreement entered with an investor that held Obalon warrants and exercised the fundamental transaction provision of their warrants. Loss on Extinguishment of Debt, net.
Removed
Loss on extinguishment of debt, net for the year ended December 31, 2021, was $2.1 million, which consisted of losses of $3.0 million related to the fair value of the warrants issued in connection with the January 19, 2021, credit agreement amendments and $0.1 million related to the early payment of the debt.
Removed
These losses were offset by a $1.0 million gain on the full extinguishment of our PPP loan, as we received official confirmation of forgiveness on March 1, 2021. Income Tax Benefit . Income tax benefit was $0.4 million for the year ended December 31, 2022, compared to a benefit of $0.3 million for the year ended December 31, 2021.
Removed
Liquidity and Capital Resources We have financed our operations to date principally through the sale of equity securities and debt financings.
Removed
We show a negative cash impact to accounts receivable of $0.3 million, due primarily to an increase in sales, a negative cash impact from increased prepaids of $0.1 million and warranty liability of $0.7 million, and a cash outflow for accounts payable and accruals of $1.3 million as the Company paid down its vendors and liabilities with the funds received from the June 2021 equity raise.

… 5 more changes not shown on this page.

Other HIND 10-K year-over-year comparisons