0001558370-21-007416 | 10-Q | XBRL Viewer

Supplemental Balance Sheet Information (Tables)

3 Months Ended

Mar. 31, 2021

Supplemental Balance Sheet Information


	March 31,		December 31,
	2021		2020
Raw materials	$	214	$	174
Sub-assemblies		749		733
Finished goods		1,132		1,337
Total inventory	$	2,095	$	2,244

Schedule of components of prepaid expenses and other current assets


	March 31,		December 31,
	2021		2020
Prepaid insurance	$	381	$	619
Prepaid contract research organization expenses		214		295
Other		241		159
Total prepaid expenses and other current assets	$	836	$	1,073

Schedule of components of accrued and other liabilities


	March 31,		December 31,
	2021		2020
Payroll and benefits	$	2,106	$	1,735
Accrued professional services		556		446
Customer deposits		397		398
Taxes		358		265
Accrued insurance premium		287		272
Other		313		514
Total accrued and other liabilities	$	4,017	$	3,630

Subsequent Events and Merger (Details) - Merger Agreement $ in Millions	Jan. 19, 2021 USD ($)
Subsequent Events
Percentage of stock owned by parent	51.00%
Approval Not Obtained Within 30 Days of the Specified Terms [Member]
Subsequent Events
Termination fees	$ 1.0
ReShape Lifesciences Inc
Subsequent Events
Ownership percentage	49.00%

Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2021

Basis of Presentation

Basis of Presentation

The accompanying interim condensed consolidated financial statements and related disclosures of Reshape Lifesciences Inc. (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 11, 2021. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.

In the opinion of management, the interim consolidated condensed financial statements reflect all adjustments considered necessary for a fair statement of the interim periods. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Fair Value of Financial Instruments

The carrying amounts of cash equivalents, accounts receivable, accounts payable and certain accrued and other liabilities approximate fair value due to their short-term maturities. Refer to Note 5 regarding the fair value of debt instruments and Note 8 regarding fair value measurements and inputs of warrants.

Net Loss Per Share

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:


	March 31,
	2021	2020
Stock options	40	46
Convertible preferred stock	1,288	1,288
Warrants	14,483,446	8,342,428

Recent Accounting Pronouncements

New accounting standards adopted by the Company in 2021 are discussed below or in the related notes, where appropriate.

In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes: ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. The adoption of this guidance on January 1, 2021 did not have a material impact on the Company’s consolidated financial statements.

New accounting standards not yet adopted are discussed below.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is intended to provide financial statement users with more useful information about expected credit losses on financial assets held by a reporting entity at each reporting date. In May 2019, the FASB issued ASU No. 2019-05, which amended the new standard by providing targeted transition relief. The new guidance replaces the existing incurred loss impairment methodology with a methodology that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all expected credit losses. In November 2019, the FASB issued ASU No. 2019-11, which amended the new standard by providing additional clarification. This guidance is effective for the fiscal years and interim periods within those years beginning after December 15, 2022. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements.

Leases - Maturities of Liabilities (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Maturities of operating lease liabilities
2022	$ 333
2023	83
Total lease payments	416
Less: imputed interest	14
Total lease liabilities	$ 402
Weighted-average remaining lease term at end of period (in years)	1 year 2 months 12 days
Weighted-average discount rate at end of period	5.10%

Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2021
Income Taxes
Income Taxes	(10) Income Taxes The Company’s tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter the Company updates its estimate of the annual effective tax rate. The Company’s quarter tax provision, and quarterly estimate of annual effective tax rate, are subject to significant volatility due to several factors, including the Company’s ability to accurately predict pre-tax income and loss. During the three months ended March 31, 2021, a $25 thousand tax expense was recorded, primarily due to projected income in Australia and Netherlands. During the three months ended March 31, 2020, an $18 thousand tax benefit was recorded, due to the valuation allowance on deferred tax assets. In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Based on the level of historical losses, projections of losses in future periods and potential limitations pursuant to changes in ownership under Internal Revenue Code (“IRC”) Section 382, the Company provided a valuation allowance at both March 31, 2021 and December 31, 2020.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Debt - Asset Purchase Consideration Payable (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Long-term debt
Total debt	$ 13,402	$ 13,322
Secured debt
Long-term debt
Total debt	2,900
Accretion of interest	$ 600
Secured debt \| Discount rate
Long-term debt
Debt fair value measurement input	0.051

Equity	3 Months Ended
Equity	Mar. 31, 2021
Equity
Equity	(7) Equity December 2020 Exercise of Warrants for Common Stock On December 3, 2020, the Company issued 290,000 shares of common stock to two healthcare focused institutional investors, totaling 580,000 shares of common stock, as an exercise of pre-funded warrants issued in connection with the June 2019 and September 2019 private placement transactions. The Company received approximately $0.1 million in connection with these exercises. June 2020 Cashless Exercise of Warrants for Common Stock On June 23, 2020, the Company issued 58,981 shares of common stock as a cashless exercise of warrants issued to the placement agents in connection with the June 2019 private placement with healthcare focused institutional investors. May 2020 Common Stock Issued for Professional Services On May 28, 2020, the Company issued 50,000 shares of common stock, having an aggregate fair value of $0.2 million for ongoing professional services. The $0.2 million was recorded as a prepaid asset and will be amortized over the minimum life of the agreement. April 2020 Exercise of Warrants for Common Stock As discussed in Note 5 above, in connection with the credit agreement, the lender exercised its Series C and Series F warrants to purchase an aggregate of 5,085,834 shares of common stock with a current exercise price of $0.12 per warrant on April 15, 2020, in which the Company received net proceeds of $0.6 million.

Liquidity and Management’s Plans (Details) - USD ($) $ in Thousands	1 Months Ended
	Jan. 31, 2021	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Liquidity and Management’s Plans
Working capital		$ (13,400)
Cash and cash equivalents and restricted cash		1,946	$ 3,007	$ 2,167	$ 2,985
Accounts receivable		$ 3,373	$ 2,620
Line of credit	$ 15,000

Intangible Assets	3 Months Ended
Intangible Assets	Mar. 31, 2021
Intangible Assets
Intangible Assets	(4) Intangible Assets Indefinite-lived intangible assets consist of in-process research and development (“IPR&D”) for the ReShape Vest recorded in connection with the Company’s acquisition of BarioSurg, Inc. The Company’s finite-lived intangible assets consists of developed technology, trademarks and tradenames, and covenant not compete. The estimated useful lives of these finite-lived intangible assets ranges from 3 to 10 years. The amortization expenses for both the three months ended March 31, 2021 and 2020 was $0.4 million.

Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Mar. 31, 2020
Indefinite-lived Intangible Assets [Line Items]
Amortization expense	$ 411	$ 417
Minimum
Indefinite-lived Intangible Assets [Line Items]
Useful Life (years)	3 years
Maximum
Indefinite-lived Intangible Assets [Line Items]
Useful Life (years)	10 years

Debt - Credit agreement (Details) - USD ($) $ / shares in Units, $ in Thousands								3 Months Ended
	Jan. 19, 2021	Dec. 16, 2020	Sep. 14, 2020	Jul. 29, 2020	Jun. 23, 2020	Apr. 15, 2020	Mar. 25, 2020	Mar. 31, 2021	Dec. 31, 2020
Short-term Debt [Line Items]
Loss on extinguishment of debt, net								$ 1,960
Debt discount								134	$ 545
Warrant exercise price (in dollars per share)						$ 0.12
Proceeds from exercise of warrants						$ 600
Credit agreement
Short-term Debt [Line Items]
Agreement amount	$ 15,000						$ 3,500
Amount received				$ 500	$ 500		2,500
Additional borrowing amount	1,000		$ 2,000				$ 1,000
Termination fees	1,000
Closing period							30 days
Threshold period to draw additional amount							5 months
Maximum amount per draw							$ 500
New debt fair value	10,000
Loss on extinguishment of debt, net								(3,000)
Debt discount								$ 500
Credit facility bear interest								2.50%
Other Noncash Expense	$ 100
Number of shares in exchange of warrant exercise						5,085,834
Warrant exercise price (in dollars per share)						$ 0.12
Proceeds from exercise of warrants						$ 600
Credit agreement \| Series G Warrants
Short-term Debt [Line Items]
Warrants issued							1,200,000
Number of shares in exchange of warrant exercise	1,000,000						1,200,000
Credit agreement \| LIBOR
Short-term Debt [Line Items]
Credit facility bear interest	2.50%							2.50%
Credit agreement third amendment
Short-term Debt [Line Items]
Amount received			1,000
Additional borrowing amount			1,000
Minimum amount per draw			$ 500
Minimum number of days between borrowings			30 days
New debt fair value			$ 3,900
Loss on extinguishment of debt, net			2,400
Debt discount			$ 600
Credit agreement third amendment \| Series G Warrants
Short-term Debt [Line Items]
Warrants issued			1,200,000
Number of shares in exchange of warrant exercise			1,200,000
Credit agreement fourth amendment
Short-term Debt [Line Items]
Amount received		$ 4,000
Additional borrowing amount		4,000
New debt fair value		8,900
Loss on extinguishment of debt, net		5,300
Debt discount		$ 600							$ 500
Credit agreement fourth amendment \| Series G Warrants
Short-term Debt [Line Items]
Warrants issued		4,000,000

Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2021

Stock-based Compensation

Schedule of stock-based compensation expense


	Three Months Ended
	March 31,
	2021		2020
General and administrative	$	101	$	427
Total stock-based compensation expense	$	101	$	427

Supplemental Balance Sheet Information

3 Months Ended

Mar. 31, 2021

Supplemental Balance Sheet Information

Supplemental Balance Sheet Information

(3) Supplemental Balance Sheet Information

Components of selected captions in the condensed consolidated balance sheets consisted of the following:

Inventory:


	March 31,		December 31,
	2021		2020
Raw materials	$	214	$	174
Sub-assemblies		749		733
Finished goods		1,132		1,337
Total inventory	$	2,095	$	2,244

Prepaid expenses and other current assets:


	March 31,		December 31,
	2021		2020
Prepaid insurance	$	381	$	619
Prepaid contract research organization expenses		214		295
Other		241		159
Total prepaid expenses and other current assets	$	836	$	1,073

Accrued and other liabilities:


	March 31,		December 31,
	2021		2020
Payroll and benefits	$	2,106	$	1,735
Accrued professional services		556		446
Customer deposits		397		398
Taxes		358		265
Accrued insurance premium		287		272
Other		313		514
Total accrued and other liabilities	$	4,017	$	3,630

Basis of Presentation (Tables)

3 Months Ended

Mar. 31, 2021

Basis of Presentation

Schedule of anti-dilutive securities


	March 31,
	2021	2020
Stock options	40	46
Convertible preferred stock	1,288	1,288
Warrants	14,483,446	8,342,428

Equity - Issuance of stock and warrants (Details) - USD ($) $ / shares in Units, $ in Millions	Dec. 03, 2020	Jun. 23, 2020	May 28, 2020	Apr. 15, 2020
Equity
Cashless exercise of warrants (Shares)		58,981
Common stock issued for professional services (Shares)			50,000
Common stock issued for professional services			$ 0.2
Institutional exercise of warrants (Shares)				5,085,834
Warrant exercise price (in dollars per share)				$ 0.12
Proceeds from exercise of warrants				$ 0.6
2019 private placement
Equity
Proceeds from exercise of warrants	$ 0.1
Stock issued (in shares)	290,000
Issuance of common stock upon exercise of warrants, net of transaction costs (in shares)	580,000

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 896	$ 2,957
Restricted cash	1,050	50
Accounts and other receivables (net of allowance for doubtful accounts of $442 and $968 respectively)	3,373	2,620
Inventory	2,095	2,244
Prepaid expenses and other current assets	836	1,073
Total current assets	8,250	8,944
Property and equipment, net	718	584
Operating lease right-of-use assets	390	465
Other intangible assets, net	26,612	27,022
Other assets	46	46
Total assets	36,016	37,061
Current liabilities:
Accounts payable	3,637	3,655
Accrued and other liabilities	4,017	3,630
Warranty liability, current	390	397
Debt, current portion, net of deferred financing costs	13,268	3,609
Operating lease liabilities, current	320	314
Total current liabilities	21,632	11,605
Debt, noncurrent portion		9,168
Operating lease liabilities, noncurrent	82	163
Warranty liability, noncurrent	979	1,022
Deferred income taxes	615	615
Total liabilities	23,308	22,573
Commitments, contingencies and subsequent events
Stockholders’ equity:
Common stock, $0.001 par value; 275,000,000 shares authorized at March 31, 2021 and December 31, 2020; 6,166,554 shares issued and outstanding at both March 31, 2021 and December 31, 2020	6	6
Additional paid-in capital	532,504	529,429
Accumulated deficit	(519,701)	(514,827)
Accumulated other comprehensive loss	(102)	(121)
Total stockholders’ equity	12,708	14,488
Total liabilities and stockholders’ equity	36,016	37,061
Series B convertible preferred stock
Stockholders’ equity:
Preferred stock, 5,000,000 shares authorized:
Series C convertible preferred stock
Stockholders’ equity:
Preferred stock, 5,000,000 shares authorized:	$ 1	$ 1

Warrants (Details) - Series G Warrants $ in Millions	Jan. 19, 2021 USD ($) Y shares	Dec. 16, 2020 USD ($) Y shares	Sep. 14, 2020 USD ($) Y shares	Mar. 25, 2020 USD ($) Y shares
Class of Warrant or Right [Line Items]
Number of warrants issued \| shares	1,000,000	4,000,000	1,200,000	1,200,000
Value of warrants issued \| $	$ 3.0	$ 5.6	$ 2.9	$ 1.4
Risk Free Rate
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.0045	0.0037	0.0027	0.0056
Remaining Life
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| Y	5	5	5	5
Expected dividends
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0	0	0	0
Volatility
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.971	1.008	1.011	0.9700

Debt - CARES Act (Details) - USD ($) $ in Thousands		3 Months Ended
Debt - CARES Act (Details) - USD ($) $ in Thousands	Apr. 24, 2020	Mar. 31, 2021
Debt Instrument [Line Items]
Gain on extinguishment of debt		$ (1,960)
Employee retention credit		300
PPP Loan
Debt Instrument [Line Items]
Amount received	$ 1,000
Discount rate (as a percent)	1.00%
Gain on extinguishment of debt		$ 1,000

Subsequent Events and Merger	3 Months Ended
Subsequent Events and Merger	Mar. 31, 2021
Subsequent Events and Merger
Subsequent Events and Merger	(13) Subsequent Events and Merger On January 19, 2021, the Company entered into an agreement and plan of merger with Obalon Therapeutics, Inc., a Delaware corporation (“Obalon”) and Optimus Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Obalon (“Merger Sub”), pursuant to which Merger Sub will merge with and into ReShape as the surviving corporation and a wholly-owned subsidiary of Obalon (the “Merger”). As a result of the Merger, Obalon will be renamed “ReShape Lifesciences Inc.” Subject to the terms and conditions of the Merger Agreement, at the closing of the Merger, each outstanding share of ReShape common stock and series B convertible preferred stock will be converted into the right to receive shares of common stock of Obalon (“Obalon Shares”) based on the exchange ratio set forth in the Merger Agreement. Upon completion of the Merger, ReShape stockholders will own approximately 51% of the combined company’s outstanding common stock and Obalon stockholders will own approximately 49%, subject to the terms of the Merger Agreement. Obalon will, at the effective time of the Merger, assume the outstanding warrants and series C convertible preferred stock of ReShape, subject to the terms of the Merger Agreement. All outstanding stock options of ReShape will be cancelled and terminated at the effective time of the Merger without any right to receive any consideration. No fractional shares will be issued in connection with the Merger and Obalon will pay cash in lieu of any such fractional shares. The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. Consummation of the Merger is subject to certain closing conditions, including, among other things, approval by the stockholders of ReShape and Obalon and the NASDAQ Stock Market’s approval of (i) the Listing of Additional Shares Notice covering the Obalon Shares to be issued in the Merger and (ii) the continued listing of the combined company following completion of the Merger ((i) and (ii) together, the “NASDAQ Approvals”). Pursuant to the Merger Agreement, ReShape has agreed to exercise its reasonable best efforts to take all necessary steps to obtain the NASDAQ Approvals following the execution of the Merger Agreement, which may include procuring additional equity or debt investments, financings or other capital raising efforts. The Merger Agreement contains specified termination rights for both ReShape and Obalon. If Obalon terminates the Merger Agreement as a result of ReShape’s breach of its covenant to use its reasonable best efforts to obtain the NASDAQ Approvals, or if either party terminates the Merger Agreement because the NASDAQ Approvals have not been obtained within 30 days following the later of the Obalon Stockholders’ Meeting and the ReShape Stockholders’ Meeting, then ReShape will be required to pay Obalon a $1.0 million termination fee, which has been deposited with a third-party escrow agent. At the effective time of the Merger, the Board of Directors of the combined company is expected to consist of the five current members of the Board of Directors of ReShape, and the executive officers of the combined company will be the current executive officers of ReShape In addition, under the terms of the Merger Agreement, Obalon has agreed to file with NASDAQ a Listing of Additional Shares Notice covering the Obalon shares to be issued in connection with the Merger on the NASDAQ Stock Market and to seek approval of NASDAQ to change its name to ReShape Lifesciences Inc. and its trading symbol for its shares of common stock to “RSLS” upon the effective time of the Merger. The Merger Agreement contains customary representations, warranties and covenants by ReShape and Obalon. ReShape and Obalon have agreed, among other things, subject to certain exceptions, not to (1) directly or indirectly initiate, seek, or solicit, or knowingly encourage or facilitate any offer or alternative proposal for specified alternative transactions, or (2) participate or engage in discussions or negotiations regarding such an offer or proposal with, or furnish any nonpublic information regarding such an offer or proposal to, any person that has made or, to ReShape’s or Obalon’s knowledge, is considering making such an offer or proposal, (3) terminate, amend, modify, or waive any standstill or similar obligation (subject to certain conditions), or (4) enter into any agreement with respect to an alternative proposal. In addition, certain covenants require each of the parties to use, subject to the terms and conditions of the Merger Agreement, their commercially reasonable efforts to cause the Merger to be consummated as promptly as practicable. Subject to certain exceptions, the Merger Agreement also requires each of ReShape and Obalon to call and hold stockholders’ meetings and requires the board of directors of each of ReShape and Obalon to recommend approval of the Merger. On April 13, 2021, the Company filed with the SEC the Definitive Proxy Statement regarding the merger proposal with Obalon. The Company held a Special Stockholders Meeting on May 13, 2021, in which the shareholders of the Company approved the merger. Obalon concurrently held a Special stockholders Meeting on May 13, 2021. To achieve a quorum for Obalon’s Special Meeting, a majority of voting power must be present or represented by proxy and as of May 13, 2021, approximately 45.5% of such shares were present or represented and approximately 96% had voted in for of the proposals. In the absence of quorum and votes necessary to approve the proposals in connection with the Merger, Obalon adjourned the meeting until May 25, 2021 in order to solicit additional votes.

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Condensed Consolidated Statements of Comprehensive Loss
Net loss	$ (4,874)	$ (4,311)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	19	(48)
Other comprehensive income (loss), net of tax	19	(48)
Comprehensive loss	$ (4,855)	$ (4,359)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Stock-based Compensation - Expense for Stock-Based Awards (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Compensation expense recognized
Stock-based compensation expense	$ 101	$ 427
Total unrecognized compensation costs related to unvested awards	$ 100
Weighted-average period of recognition for unrecognized compensation costs related to unvested awards	10 months 24 days
Options granted (in shares)	0	0
General and Administrative
Compensation expense recognized
Stock-based compensation expense	$ 101	$ 427

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Allowance for bad debts	$ 442	$ 968
Preferred stock, authorized	5,000,000	5,000,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	275,000,000	275,000,000
Common stock, shares issued	6,166,554	6,166,554
Common stock, shares outstanding	6,166,554	6,166,554
Series B convertible preferred stock
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, issued	3	3
Preferred stock outstanding	3	3
Series C convertible preferred stock
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, issued	95,388	95,388
Preferred stock outstanding	95,388	95,388

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2021	May 14, 2021
Cover [Abstract]
Document Type	10-Q
Document Period End Date	Mar. 31, 2021
Entity Registrant Name	RESHAPE LIFESCIENCES INC.
Title of 12(b) Security	Common stock
Trading Symbol	RSLS
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Interactive Data Current	Yes
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		6,166,554
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001371217
Amendment Flag	false

Leases

3 Months Ended

Mar. 31, 2021

Leases

Leases

(6) Leases

The Company has a noncancelable operating lease for office and warehouse space in San Clemente, California and noncancelable operating leases for certain office equipment that expire at various dates through 2022. The Company does not have any short-term leases or financing lease arrangements and the effects of any lease modifications have not been material. Certain of the Company’s equipment leases include variable lease payments that are adjusted periodically based on actual usage. Lease and non-lease components are accounted for separately.

Operating lease costs was $0.1 million for both the three months ended March 31, 2021 and 2022. Variable lease costs were not material.

Supplemental information related to operating leases is as follows:


Balance Sheet Information at March 31, 2021
Operating lease ROU assets	$	390

Operating lease liabilities, current portion	$	320
Operating lease liabilities, long-term portion		82
Total operating lease liabilities	$	402

Cash Flow Information for the Three Months Ended March 31, 2021
Cash paid for amounts included in the measurement of operating leases liabilities	$	81

Maturities of operating lease liabilities were as follows:


Twelve months ending March 31,
2022	$	333
2023		83
2024		—
Total lease payments		416
Less: imputed interest		14
Total lease liabilities	$	402

Weighted-average remaining lease term at end of period (in years)		1.2
Weighted-average discount rate at end of period		5.1

Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Inventory:
Raw materials	$ 214	$ 174
Sub-assemblies	749	733
Finished goods	1,132	1,337
Total inventory	2,095	2,244
Prepaid expenses and other current assets:
Prepaid insurance	381	619
Prepaid contract research organization expenses	214	295
Other	241	159
Total prepaid expenses and other current assets	836	1,073
Accrued and other liabilities:
Payroll and benefits	2,106	1,735
Accrued professional services	556	446
Customer deposits	397	398
Taxes	358	265
Accrued insurance premium	287	272
Other	313	514
Total accrued and other liabilities	$ 4,017	$ 3,630

Revenue Disaggregation and Operating Segments

3 Months Ended

Mar. 31, 2021

Revenue Disaggregation and Operating Segments

Revenue Disaggregation and Operating Segments

(9) Revenue Disaggregation and Operating Segments

The Company conducts operations worldwide and has sales in the following regions: United States, Australia, Europe and Rest of World. For the three months ended March 31, 2021 and 2020, the Company primarily only sold the LAP-BAND product line. The following table presents the Company’s revenue disaggregated by geography:


	Three Months Ended
	March 31,
	2021		2020
United States	$	2,520	$	1,954
Australia		293		298
Europe		379		537
Rest of world		29		—
Total net revenue	$	3,221	$	2,789

*The next largest individual country outside the United States was Australia for the three months ended March 31, 2021 and 2020 which was 9.1% and 10.7%, respectively, of total revenues.

Operating Segments

The Company conducts operations worldwide and is managed in the following geographical regions: United States, Australia, Europe and the Rest of World (primarily in The Middle East). All regions sell the LAP-BAND product line, which consisted of nearly all our revenue and gross profit for the three months ended March 31, 2021 and 2020. During the second half of 2020 the Company launched reshapecare, which had minimal revenue for the three months ended March 31, 2021 and no revenue for the three months ended March 31, 2020. The Company anticipates generating more reshapecare revenue late in the second quarter and in to the second half of the year. There was no revenue or gross profit recorded for the ReShape Vest or Diabetes Bloc-Stim Neuromodulation for the three months ended March 31, 2021 and 2020 as these two products are still in the development stage.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
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-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
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-Section 50
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-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
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-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

Revenue Disaggregation and Operating Segments (Tables)

3 Months Ended

Mar. 31, 2021

Revenue Disaggregation and Operating Segments

Schedule of revenue disaggregated by product and geography


	Three Months Ended
	March 31,
	2021		2020
United States	$	2,520	$	1,954
Australia		293		298
Europe		379		537
Rest of world		29		—
Total net revenue	$	3,221	$	2,789

*The next largest individual country outside the United States was Australia for the three months ended March 31, 2021 and 2020 which was 9.1% and 10.7%, respectively, of total revenues.

Commitments and Contingencies	3 Months Ended
Commitments and Contingencies	Mar. 31, 2021
Commitments and Contingencies
Commitments and Contingencies	(12) Commitments and Contingencies Litigation 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. The medical device industry in which the Company operates is characterized by frequent claims and litigations, including claims regarding patent and other intellectual property rights as well as improper hiring practices. As a result, the Company may be involved in various legal proceedings from time to time. Product Liability Claims The Company is exposed to product liability claims that are inherent in the testing, production, marketing and sale of medical devices. Management believes any losses that may occur from these matters are adequately covered by insurance, and the ultimate outcome of these matters will not have a material effect on the Company’s financial position or results of operations. The Company is not currently a party to any product liability litigation and is not aware of any pending or threatened product liability litigation that is reasonably possible to have a material adverse effect on the Company’s business, operating results or financial condition.

Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases

Schedule of supplemental information related to operating leases


Balance Sheet Information at March 31, 2021
Operating lease ROU assets	$	390

Operating lease liabilities, current portion	$	320
Operating lease liabilities, long-term portion		82
Total operating lease liabilities	$	402

Cash Flow Information for the Three Months Ended March 31, 2021
Cash paid for amounts included in the measurement of operating leases liabilities	$	81

Schedule of maturities of operating lease liabilities


Twelve months ending March 31,
2022	$	333
2023		83
2024		—
Total lease payments		416
Less: imputed interest		14
Total lease liabilities	$	402

Weighted-average remaining lease term at end of period (in years)		1.2
Weighted-average discount rate at end of period		5.1

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Condensed Consolidated Statements of Operations
Revenue	$ 3,221	$ 2,789
Cost of revenue	937	1,285
Gross profit	2,284	1,504
Operating expenses:
Sales and marketing	1,250	1,454
General and administrative	2,720	2,836
Research and development	571	1,295
Total operating expenses	4,541	5,585
Operating loss	(2,257)	(4,081)
Other expense (income), net:
Interest expense, net	599	104
Loss on extinguishment of debt, net	1,960
Loss on foreign currency exchange	33	144
Loss before income tax provision	(4,849)	(4,329)
Income tax expense (benefit)	25	(18)
Net loss	$ (4,874)	$ (4,311)
Net loss per share - basic and diluted:
Net loss per share - basic and diluted (in dollars per share)	$ (0.70)	$ (0.63)
Shares used to compute basic and diluted net loss per share	6,968,221	6,859,240

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows from operating activities:
Net loss	$ (4,874)	$ (4,311)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	7	4
Amortization of intangible assets	411	417
Noncash interest expense	43	58
Loss on extinguishment of debt, net	1,960
Stock-based compensation	101	427
Bad debt expense	27	149
Provision for inventory excess and obsolescence	1
Amortization of debt discount and deferred debt issuance costs	461	47
Other noncash items	17	18
Change in operating assets and liabilities:
Accounts and other receivables	(780)	848
Inventory	182	60
Prepaid expenses and other current assets	237	(274)
Accounts payable and accrued liabilities	296	(865)
Warranty liability	(50)	173
Other		4
Net cash used in operating activities	(1,961)	(3,245)
Cash flows from investing activities:
Capital expenditures	(119)
Cash used in investing activities:	(119)
Cash flows from financing activities:
Proceeds from credit agreement	1,000	2,500
Payments of financing costs		(25)
Net cash provided by financing activities	1,000	2,475
Effect of currency exchange rate changes on cash and cash equivalents	19	(48)
Net increase (decrease) in cash, cash equivalents and restricted cash	(1,061)	(818)
Cash, cash equivalents and restricted cash at beginning of period	3,007	2,985
Cash, cash equivalents and restricted cash at end of period	1,946	2,167
Supplemental disclosure:
Cash paid for income taxes	31
Noncash investing and financing activities:
Fair value of warrants included as a component of loss on extinguishment of debt	2,974
Relative fair value of warrants classified as debt issuance costs		$ 1,393
Capital expenditures accruals	$ 141

Income Taxes - Income Tax Benefit (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Current:
Income tax expense (benefit)	$ 25	$ (18)

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Debt

3 Months Ended

Mar. 31, 2021

Debt

Debt

(5) Debt


	March 31,		December 31,
	2021		2020
Asset purchase consideration	$	2,902	$	2,867
Credit agreement		10,500		9,500
PPP Loan		—		955
Total debt		13,402		13,322
Less: unamortized debt discount		134		545
Less: current portion of debt		13,268		3,609
Debt, noncurrent portion	$	—	$	9,168

Credit Facility

On January 19, 2021, the Company entered into a $15.0 million Line of Credit with an institutional investor that the Company may access from time to time until December 31, 2022. As of March 31, 2021, the Company has not drawn down any amounts under the Credit Facility. Any advances would bear interest at a rate per annum equal to the LIBOR rate plus 2.5% and would be subject to the Guarantee and Collateral Agreement between the Company and the institutional investor dated March 25, 2020.

CARES Act

On April 24, 2020, the Company entered into a PPP Loan agreement with Silicon Valley Bank (“SVB”) under the PPP, which is part of the CARES Act administered by the United States Small Business Administration (“SBA”). As part of the application for these funds, the Company in good faith, has certified that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. Under this program, the Company received proceeds of $1.0 million from the PPP Loan. In accordance with the requirements of the PPP, the Company intends to use proceeds from the PPP Loan primarily for payroll costs, rent and utilities. The PPP Loan has a 1.00% interest rate per annum, matures on April 24, 2022 and is subject to the terms and conditions applicable to loans administered by the SBA under the PPP.

On February 23, 2021, the Company submitted the application for PPP loan forgiveness, in accordance with the terms and conditions of the SBA’s Loan Forgiveness Application (revised June 24, 2020). On March 1, 2021, the Company received confirmation from the SBA that the PPP Loan was forgiven in full including all interest incurred, which resulted in a gain on debt extinguishment of $1.0 million, during the three months ended March 31, 2021.

Under the provisions of the CARES Act, the Company is eligible for a refundable employee retention credit subject to certain criteria. The Company recognized a $0.3 million employee retention credit during the three months ended March 31, 2021.

Credit Agreement

On March 25, 2020, the Company executed a credit agreement up to $3.5 million, with an institutional investor (the “Lender”), who holds warrants in connection with the June 2019 and September 2019 transactions. On the day of closing, the Company received $2.5 million and the additional $1.0 million may be drawn from time to time 30 days after the closing date but prior to five months after the closing date, in $500 thousand increments per draw. On June 23, 2020, the Company made the first additional draw of $500 thousand and on July 29, 2020 the second $500 thousand draw was made. As required by the terms of this credit agreement, the lender exercised its warrants to purchase an aggregate of 5,085,834 shares of common stock with a current exercise price of $0.12 per warrant on April 15, 2020, in which the Company received net proceeds of $0.6 million. In addition, the Company issued to the lender 1,200,000 Series G warrants to purchase an aggregate of 1,200,000 shares of common stock. As an inducement to the Lender to enter into the amendment and make the additional loans contemplated thereby, the Company issued to the Lender an additional 1,200,000 Series G warrants dated September 14, 2020 to purchase an aggregate of 1,200,000 shares of common stock. The original Series G warrants were valued using the relative fair value basis and the amount was recorded as part of the debt issuance costs, see Note 8 for additional details.

On September 14, 2020, the Company and the Lender entered into an amendment to the credit agreement that increased the amount available under delayed draw term loans by $2.0 million. The Company borrowed $1.0 million of the available amount immediately and the remaining $1.0 million will be available in increments of least $500 thousand with at least 30 days between borrowings and issued an additional 1,200,000 Series G Warrants. The Company evaluated the accounting related to the amendment and in conjunction with the warrants issued. Based on this analysis the Company determined the agreements are substantially different and extinguished the original credit agreement and recorded the amended credit agreement as a new debt at a fair value of $3.9 million. As a result in 2020, the Company recorded a debt discount of approximately $0.6 million and a $2.4 million loss on extinguishment of debt which is comprised of the fair value of the warrants and unamortized debt issuance cost with the original credit agreement, offset by the debt discount. Pursuant to the amendment of the credit agreement, the maturity date of the loans was March 31, 2021 and the loans bear interest at LIBOR plus 2.5%.

On December 16, 2020, the Company and the Lender entered into the third amendment to the credit agreement that increased the amount available under delayed draw term loans by an additional $4.0 million. The Company borrowed the entire $4.0 million of the available amount immediately and issued an additional 4,000,000 Series G Warrants. The Company evaluated the accounting related to the amendment and in conjunction with the warrants issued. Based on this analysis the Company determined the agreements are substantially different and extinguished the original credit agreement and recorded the amended credit agreement as a new debt at a fair value of $8.9 million. As a result in 2020, the Company recorded a debt discount of approximately $0.6 million and a $5.3 million loss on extinguishment of debt which is comprised of the fair value of the warrants and unamortized debt discount cost with the original credit agreement, offset by the debt discount related to the new debt. At December 31, 2020 there was approximately $0.5 million of unamortized debt discount. Pursuant to the amendment of the credit agreement, the maturity date of the loan was March 31, 2021 and the loans bear interest at LIBOR plus 2.5%.

On January 19, 2021, the Company and the Lender entered into an amendment to the credit agreement that increased the amount available under delayed draw term loans by $1.0 million, which was used to fund the $1.0 million escrow fund securing the termination fee under the Merger Agreement and issued an additional 1,000,000 Series G Warrants. The Company evaluated the accounting related to the amendment and in conjunction with the warrants issued. Based on this analysis the Company determined the agreements are substantially different and extinguished the original credit agreement and recorded the amended credit agreement as a new debt at a fair value of $10.0 million. As a result, during the three months ended March 31, 2021, the Company recorded a debt discount of approximately $0.5 million and a $3.0 million loss on extinguishment of debt, which is comprised of the fair value of the warrants and unamortized debt issuance cost with the original credit agreement, offset by the debt discount. At March 31, 2021, there was approximately $0.1 million of unamortized debt discount. Pursuant to the amendment of the credit agreement, the maturity date of the loans are March 31, 2021 and the loans bear interest at LIBOR plus 2.5%.

On March 10, 2021, the Company and the Lender entered into an amendment to the credit agreement that extended the maturity date from March 31, 2021 to March 31, 2022. The Company has accounted for this amendment as a debt modification. The associated unamortized debt discount on the January 19, 2021 amendment of $0.1 million, will be amortized as interest expense over the term of the amended credit agreement.

Asset Purchase Consideration Payable

The asset purchase consideration payable related to the Company’s December 2018 acquisition of the Lap-Band product line from Apollo Endosurgery, Inc. (“Apollo”), was initially recorded at net present value using a discount rate of 5.1%. The asset purchase consideration payable was originally secured by a first security interest in substantially all of the Company’s assets, but that security interest terminated in accordance with its terms in October 2019. At March 31, 2021, the aggregate carrying value of the current asset purchase consideration payable of approximately $2.9 million, as adjusted for accretion of interest of approximately $0.6 million.

Basis of Presentation

3 Months Ended

Mar. 31, 2021

Basis of Presentation

Basis of Presentation

(1) Basis of Presentation

Fair Value of Financial Instruments

Net Loss Per Share


	March 31,
	2021	2020
Stock options	40	46
Convertible preferred stock	1,288	1,288
Warrants	14,483,446	8,342,428

Recent Accounting Pronouncements

New accounting standards adopted by the Company in 2021 are discussed below or in the related notes, where appropriate.

New accounting standards not yet adopted are discussed below.

Warrants	3 Months Ended
Warrants	Mar. 31, 2021
Warrants.
Warrants	(8) Warrants On January 19, 2021, the Company issued 1,000,000 Series G Warrants to an institutional investor in connection with an amendment to the credit agreement. The Series G Warrants were valued at $3.0 million using the fair value approach at the time of issuance and was recorded as a component of the loss on extinguishment of debt during the three months ended March 31, 2021, see Note 5 above for details. The fair value of the Series G Warrants was determined using a Black Scholes option pricing model using a risk free rate of 0.45%, an expected term of five years; expected dividends of zero and expected volatility of 97.1%. On December 16, 2020, the Company issued 4,000,000 Series G Warrants to an institutional investor in connection with an amendment to the credit agreement. The Series G Warrants were valued at $5.6 million using the fair value approach at the time of issuance and was recorded as a component of the loss on extinguishment of debt in 2020, see Note 5 above for details. The fair value of the Series G Warrants was determined using a Black Scholes option pricing model using a risk free rate of 0.37%, an expected term of five years; expected dividends of zero and expected volatility of 100.8%. On September 14, 2020, the Company issued 1,200,000 Series G Warrants to an institutional investor in connection with an amendment to the credit agreement. The Series G Warrants were valued at $2.9 million using the fair value approach at the time of issuance and was recorded as a component of the loss on extinguishment of debt in 2020, see Note 5 above for details. The fair value of the Series G Warrants was determined using a Black Scholes option pricing model using a risk-free interest rate of 0.27%, an expected term of five years; expected dividends of zero and expected volatility of 101.1%. On March 25, 2020, the Company issued 1,200,000 Series G Warrants to an institutional investor in connection with the credit agreement, see Note 5 above for details. The Series G Warrants were valued at $1.4 million using the relative fair value approach at the time of issuance and was recorded as deferred debt issuance cost in 2020. The relative fair value of the Series G Warrants was determined using a Black Scholes option pricing model using a risk-free interest rate of 0.56%; an expected term of five years; expected dividends of zero and expected volatility of 97.00%.

Liquidity and Management’s Plans	3 Months Ended
Liquidity and Management’s Plans	Mar. 31, 2021
Liquidity and Management’s Plans
Liquidity and Management’s Plans	(2) Liquidity and Management’s Plans The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company currently does not generate revenue sufficient to offset operating costs and anticipates such shortfalls to continue in the short-term. The Company’s history of operating losses and limited cash resources and lack of certainty regarding obtaining significant third-party reimbursement of its products, raise substantial doubt about its ability to continue as a going concern. As of March 31, 2021, the Company had net negative working capital of approximately $13.4 million. The Company’s principal source of liquidity as of March 31, 2021 consisted of approximately $1.9 million of cash and cash equivalents and restricted cash, and $3.4 million of accounts receivable. During January 2021, the Company entered into a $15.0 million Line of Credit with an institutional investor, which has not been drawn upon as of March 31, 2021. For further details see Note 5. The Company’s anticipated operations include plans to (i) manufacture, and promote the sales and operations of the LAP-BAND® product line in order to expand sales domestically and internationally as well as to obtain cost savings synergies, (ii) introduce to the market place reshapecareTM, (iii) continue clinical testing of the ReShape Vest, (iv) continue development of the Diabetes Bloc-Stim Neuromodulation, (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 expend our portfolio and offer future minimally invasive treatments and therapies in the obesity continuum of care, which includes the pending merger with Obalon Therapeutics, Inc. pursuant to the merger agreement that was entered into with Obalon on January 19, 2021, for further details see Note 13. 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. However, the Company will ultimately need to achieve sufficient revenues from product sales and obtain additional debt or equity financing to support its operations. COVID-19 Risk and Uncertainties and CARES Act Additionally, on January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally and on March 13, 2020, the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. These mandated business closures have at times included the cessation of non-elective surgeries in Australia, Europe and the United States for all but emergency procedures. As a result of these mandates, on April 16, 2020, the Company implemented various short-term cost reductions and cash flow improvement actions, such as reducing the compensation for executives, management and key employees and decreasing operating expenses where possible. In addition, the Company identified temporary headcount reductions and made the decision to furlough a portion of its workforce. During the second quarter of 2020, the mandated closures began to ease in many areas throughout the world and within the United States. As a result of this, elective surgeries started back up again through various parts of the world, which led to improved sales progressing through the third quarter. Even after the COVID-19 outbreak has subsided, the Company may continue to experience materially adverse impact on its financial condition and results of operation. Additionally, on June 15, 2020, the Company ended the temporary pay reductions and the furloughed employees returned to work. The full impact of the COVID-19 outbreak continues to evolve and it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce and has taken actions to mitigate the impact including among other things, temporary reductions in pay, and furloughs of certain positions along with deferrals in payment for cash preservation. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2021. On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act established the Paycheck Protection Program (“PPP”) under which the Company received a PPP loan described in more detail in Note 8 below. On February 3, 2021, the Company submitted the application for PPP loan forgiveness according to the terms and conditions of the SBA’s Loan Forgiveness Application (Revised June 24, 2002). On March 1, 2021, the Company received confirmation from the SBA that, the PPP Loan had been forgiven in full including all interest incurred. For further details, see Note 5.

Revenue Disaggregation and Operating Segments (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) item	Mar. 31, 2020 USD ($) item
Revenue Recognition
Revenue	$ 3,221	$ 2,789
Number of Products in Development Stage \| item	2	2
United States
Revenue Recognition
Revenue	$ 2,520	$ 1,954
Australia
Revenue Recognition
Revenue	293	298
Europe
Revenue Recognition
Revenue	379	537
Rest of world
Revenue Recognition
Revenue	29
ReshapeCare product
Revenue Recognition
Revenue		0
ReShape Vest and Diabetes Bloc-Stim Neuromodulation Products
Revenue Recognition
Revenue	$ 0	$ 0
Revenues \| Geographic area \| Australia
Revenue Recognition
Percentage of total	9.10%	10.70%

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Preferred Stock Series B convertible preferred stock	Preferred Stock Series C convertible preferred stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Balance at Dec. 31, 2019		$ 1		$ 517,311	$ (493,197)	$ (8)	$ 24,107
Balance (in shares) at Dec. 31, 2019	3	95,388	391,739
Changes in Stockholders' (Deficit) Equity
Net loss					(4,311)		(4,311)
Other comprehensive income (loss), net of tax						(48)	(48)
Stock-based compensation expense				427			427
Issuance of warrants				1,393			1,393
Balance at Mar. 31, 2020		$ 1		519,131	(497,508)	(56)	21,568
Balance (in shares) at Mar. 31, 2020	3	95,388	391,739
Balance at Dec. 31, 2020		$ 1	$ 6	529,429	(514,827)	(121)	14,488
Balance (in shares) at Dec. 31, 2020	3	95,388	6,166,554
Changes in Stockholders' (Deficit) Equity
Net loss					(4,874)		(4,874)
Other comprehensive income (loss), net of tax						19	19
Stock-based compensation expense				101			101
Issuance of warrants				2,974			2,974
Balance at Mar. 31, 2021		$ 1	$ 6	$ 532,504	$ (519,701)	$ (102)	$ 12,708
Balance (in shares) at Mar. 31, 2021	3	95,388	6,166,554

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

+ References + Details

Basis of Presentation - Anti-dilutive Securities (Details) - shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Stock options
Anti-dilutive securities
Anti-dilutive securities (in shares)	40	46
Convertible preferred stock
Anti-dilutive securities
Anti-dilutive securities (in shares)	1,288	1,288
Warrants
Anti-dilutive securities
Anti-dilutive securities (in shares)	14,483,446	8,342,428

Debt (Tables)

3 Months Ended

Mar. 31, 2021

Debt

Summary of long term debt


	March 31,		December 31,
	2021		2020
Asset purchase consideration	$	2,902	$	2,867
Credit agreement		10,500		9,500
PPP Loan		—		955
Total debt		13,402		13,322
Less: unamortized debt discount		134		545
Less: current portion of debt		13,268		3,609
Debt, noncurrent portion	$	—	$	9,168

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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-Paragraph 1
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Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
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+ Details

Stock-based Compensation

3 Months Ended

Mar. 31, 2021

Stock-based Compensation

Stock-based Compensation

(11) Stock-based Compensation

Stock-based compensation expense related to stock options issued under the ReShape Lifesciences Inc. Second Amended and Restated 2003 Stock Incentive Plan (the “Plan”) and as inducement grants for the three months ended March 31, 2021 and 2020 were as follows:


	Three Months Ended
	March 31,
	2021		2020
General and administrative	$	101	$	427
Total stock-based compensation expense	$	101	$	427

As of March 31, 2021, there was approximately $0.1 million of total unrecognized compensation costs related to unvested stock option awards, which are to be recognized over a weighted-average period of 0.9 years. There were no stock options granted during both the three months ended March 31, 2021 and 2020.

Debt - Long term debt (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Total debt	$ 13,402	$ 13,322
Less: unamortized debt discount	134	545
Less: current portion of debt	13,268	3,609
Debt, noncurrent portion		9,168
Asset purchase consideration
Debt Instrument [Line Items]
Total debt	2,902	2,867
Credit agreement
Debt Instrument [Line Items]
Total debt	$ 10,500	9,500
PPP Loan
Debt Instrument [Line Items]
Total debt		$ 955

Leases - Supplemental Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Leases
Operating lease costs	$ 100	$ 100
Balance Sheet Information related to operating leases
Operating lease ROU assets	390		$ 465
Operating lease liabilities, current	320		314
Operating lease liabilities, long-term portion	82		$ 163
Total operating lease liabilities	402
Cash Flow Information related to operating leases
Cash paid for amounts included in the measurement of operating leases liabilities	$ 81