0001558370-21-011785 | 10-Q | XBRL Viewer

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2021	Aug. 12, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	1-37897
Entity Registrant Name	RESHAPE LIFESCIENCES INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-1828101
Entity Address, Address Line One	1001 Calle Amanecer
Entity Address, City or Town	San Clemente
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92673
City Area Code	(949)
Local Phone Number	429-6680
Title of 12(b) Security	Common stock, $0.001 par value per share
Trading Symbol	RSLS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		15,842,185
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001427570
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 40,163	$ 2,957
Restricted cash	50	50
Accounts and other receivables (net of allowance for doubtful accounts of $1,040 and $968 respectively)	3,422	2,620
Inventory	2,894	2,244
Deferred stock issuance costs	17,705
Prepaid expenses and other current assets	1,371	1,073
Total current assets	65,605	8,944
Property and equipment, net	1,588	584
Operating lease right-of-use assets	632	465
Other intangible assets, net	28,924	27,022
Goodwill	21,623
Other assets	1,628	46
Total assets	120,000	37,061
Current liabilities:
Accounts payable	3,095	3,655
Accrued and other liabilities	53,333	3,630
Warranty liability, current	468	397
Debt, current portion, net of deferred financing costs	2,936	3,609
Operating lease liabilities, current	664	314
Total current liabilities	60,496	11,605
Debt, noncurrent portion		9,168
Operating lease liabilities, noncurrent		163
Warranty liability, noncurrent	732	1,022
Deferred income taxes	615	615
Other liabilities	38
Total liabilities	61,881	22,573
Commitments, contingencies and subsequent events
Stockholders' equity:
Preferred stock, Value
Common stock, $0.001 par value; 100,000,000 and 275,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively; 8,168,622 and 6,166,554 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	8	6
Additional paid-in capital	581,823	529,429
Accumulated deficit	(523,603)	(514,827)
Accumulated other comprehensive loss	(109)	(121)
Total stockholders' equity	58,119	14,488
Total liabilities and stockholders' equity	120,000	37,061
Series B convertible preferred stock
Stockholders' equity:
Preferred stock, Value
Series C convertible preferred stock
Stockholders' equity:
Preferred stock, Value		$ 1

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Allowance for bad debts	$ 1,040	$ 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	100,000,000	275,000,000
Common stock, shares issued	8,168,622	6,166,554
Common stock, shares outstanding	8,168,622	6,166,554
Series B convertible preferred stock
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, issued	0	3
Preferred stock outstanding	0	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

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Condensed Consolidated Statements of Operations
Revenue	$ 3,529	$ 1,702	$ 6,750	$ 4,491
Cost of revenue	1,376	865	2,314	2,150
Gross profit	2,153	837	4,436	2,341
Operating expenses:
Sales and marketing	1,441	831	2,691	2,285
General and administrative	4,311	2,539	7,031	5,375
Research and development	103	465	674	1,761
Total operating expenses	5,855	3,835	10,396	9,421
Operating loss	(3,702)	(2,998)	(5,960)	(7,080)
Other expense (income), net:
Interest expense, net	172	789	771	893
Loss on extinguishment of debt, net	101		2,061
Loss (gain) on foreign currency exchange, net	(101)	(133)	(69)	10
Loss before income tax provision	(3,874)	(3,654)	(8,723)	(7,983)
Income tax expense (benefit)	28	(50)	53	(68)
Net loss	$ (3,902)	$ (3,604)	$ (8,776)	$ (7,915)
Net loss per share - basic and diluted:
Net loss per share - basic and diluted (in dollars per share)	$ (0.47)	$ (0.52)	$ (1.11)	$ (1.15)
Shares used to compute basic and diluted net loss per share	8,226,144	6,911,497	7,928,702	6,885,368

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Condensed Consolidated Statements of Comprehensive Loss
Net loss	$ (3,902)	$ (3,604)	$ (8,776)	$ (7,915)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(7)	27	12	(21)
Other comprehensive income (loss), net of tax	(7)	27	12	(21)
Comprehensive loss	$ (3,909)	$ (3,577)	$ (8,764)	$ (7,936)

- 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

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 Income (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					(7,915)		(7,915)
Other comprehensive income (loss), net of tax						(21)	(21)
Reversal of stock compensation				774			774
Issuance of warrants				1,393			1,393
Institutional exercise of warrants			$ 5	605			610
Institutional exercise of warrants (in shares)			5,085,834
Cashless exercise of warrants (in shares)			58,981
Common stock issued for professional services				205			205
Common stock issued for professional services (in shares)			50,000
Balance at Jun. 30, 2020		$ 1	$ 5	520,288	(501,112)	(29)	19,153
Balance (in shares) at Jun. 30, 2020	3	95,388	5,586,554
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
Changes in Stockholders' (Deficit) Equity
Net loss					(3,604)		(3,604)
Other comprehensive income (loss), net of tax						27	27
Reversal of stock compensation				347			347
Institutional exercise of warrants			$ 5	605			610
Institutional exercise of warrants (in shares)			5,085,834
Cashless exercise of warrants (in shares)			58,981
Common stock issued for professional services				205			205
Common stock issued for professional services (in shares)			50,000
Balance at Jun. 30, 2020		$ 1	$ 5	520,288	(501,112)	(29)	19,153
Balance (in shares) at Jun. 30, 2020	3	95,388	5,586,554
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					(8,776)		(8,776)
Other comprehensive income (loss), net of tax						12	12
Cancellation of common stock pursuant to reverse acquisition			$ (2)	2
Cancellation of common stock pursuant to reverse acquisition (in shares)			(2,680,301)
Issuance of common stock pursuant to reverse acquisition		$ (1)	$ 3	30,559			30,561
Issuance of common stock pursuant to reverse acquisition (in shares)	(3)		3,340,035
Reversal of stock compensation				(263)			(263)
Deferred issuance cost for shares held in abeyance				17,705			17,705
Issuance of warrants				2,974			2,974
Institutional exercise of warrants			$ 1	1,202			1,203
Institutional exercise of warrants (in shares)			1,250,470
Stock options exercised				215			215
Stock options exercised (in shares)			91,864
Balance at Jun. 30, 2021			$ 8	581,823	(523,603)	(109)	58,119
Balance (in shares) at Jun. 30, 2021		95,388	8,168,622
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
Changes in Stockholders' (Deficit) Equity
Net loss					(3,902)		(3,902)
Other comprehensive income (loss), net of tax						(7)	(7)
Cancellation of common stock pursuant to reverse acquisition			$ (2)	2
Cancellation of common stock pursuant to reverse acquisition (in shares)			(2,680,301)
Issuance of common stock pursuant to reverse acquisition		$ (1)	$ 3	30,559			30,561
Issuance of common stock pursuant to reverse acquisition (in shares)	(3)		3,340,035
Reversal of stock compensation				(364)			(364)
Deferred issuance cost for shares held in abeyance				17,705			17,705
Institutional exercise of warrants			$ 1	1,202			1,203
Institutional exercise of warrants (in shares)			1,250,470
Stock options exercised				215			215
Stock options exercised (in shares)			91,864
Balance at Jun. 30, 2021			$ 8	$ 581,823	$ (523,603)	$ (109)	$ 58,119
Balance (in shares) at Jun. 30, 2021		95,388	8,168,622

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash flows from operating activities:
Net loss	$ (8,776)	$ (7,915)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	40	5
Amortization of intangible assets	828	833
Noncash interest expense	78	117
Loss on extinguishment of debt, net	2,061
(Reversal) Stock-based compensation	(263)	774
Bad debt expense	56	185
Provision for inventory excess and obsolescence	13	188
Amortization of debt discount and deferred debt issuance costs	494	756
Other noncash items	15	20
Change in operating assets and liabilities, net of business combination:
Accounts and other receivables	(859)	1,028
Inventory	481	(950)
Prepaid expenses and other current assets	(267)	(90)
Accounts payable and accrued liabilities	1,853	(958)
Warranty liability	(219)	142
Other	316	53
Net cash used in operating activities	(4,149)	(5,812)
Cash flows from investing activities:
Capital expenditures	(196)	(82)
Proceeds received from acquisition	5,207
Cash provided by (used in) investing activities:	5,011	(82)
Cash flows from financing activities:
Payments of financing costs		(59)
Proceeds from institutional exercise of warrants	45,616	610
Proceeds from stock options exercised	216
Proceeds from credit agreement	1,000	3,000
Payment of credit agreement	(10,500)
Proceeds from PPP loan		955
Net cash provided by financing activities	36,332	4,506
Effect of currency exchange rate changes on cash and cash equivalents	12	(21)
Net increase (decrease) in cash, cash equivalents and restricted cash	37,206	(1,409)
Cash, cash equivalents and restricted cash at beginning of period	3,007	2,985
Cash, cash equivalents and restricted cash at end of period	40,213	1,576
Supplemental disclosure:
Cash paid for income taxes	31
Cash paid for interest	296
Noncash investing and financing activities:
Purchase price, net of cash received	25,355
Deferred issuance cost related to abeyance of shares	17,705
Fair value of warrants included as a component of loss on extinguishment of debt	2,974
Accrued financing costs	3,234
Capital expenditures accruals	$ 51	6
Relative fair value of warrants classified as debt issuance costs		$ 1,393

Basis of Presentation

6 Months Ended

Jun. 30, 2021

Basis of Presentation

Basis of Presentation

(1) Basis of Presentation

The accompanying interim condensed consolidated financial statements and related disclosures of Reshape Lifesciences Inc. (the “Company” or “ReShape”) 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.

Acquisition

The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business generally being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Transaction costs associated with business combinations are expensed as incurred and are included in acquisition related costs in the consolidated statements of operations. The Company performs valuations of assets acquired and liabilities assumed and allocates the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates

Upon completion of the business combination on June 15, 2021 with Obalon Therapeurtics, Inc. (“Obalon”), the transaction was treated as a “reverse acquisition” for financial accounting purposes. As a result of the controlling interest of the former shareholders of ReShape, for financial statement reporting and accounting purposes, ReShape was considered the acquirer under the acquisition method of accounting in accordance with the FASB Accounting Standards Codification (“ASC”) 805-10-55. The reverse acquisition is deemed a capital transaction in substance whereas the historical assets and liabilities of Obalon before the business combination were replaced with the historical financial statements of ReShape in all future filings with the SEC.

Goodwill and Long-Lived Assets

Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.

Indefinite-lived intangible assets relate to in-process research and development ("IPR&D") acquired in business combinations. The estimated fair values of IPR&D projects acquired in a business combination which have not reached technological feasibility are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the projects. In accordance with guidance within Financial Accounting Standards Board (FASB) Accounting Standards Codification (“ASC”) 350 “Intangibles - Goodwill and Other,” goodwill and identifiable intangible assets with indefinite lives are not subject to amortization but must be evaluated for impairment.

We evaluate long-lived assets, including finite-lived intangible assets, for impairment by comparison of the carrying amounts to future net undiscounted cash flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value or estimates of future discounted cash flows.

For goodwill and indefinite-lived intangible assets, in-process research and development, we review for impairment annually and upon the occurrence of certain events as required by Accounting Standards Codification (“ASC”) Topic 350, “Intangibles — Goodwill and Other.” Goodwill and indefinite-lived intangible assets are tested at least annually for impairment and more frequently if events or changes in circumstances indicate that the asset might be impaired. We review goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If we are able to determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, we would conclude that goodwill is not impaired. If the carrying amount of a reporting unit is zero or negative, the second step of the impairment test is performed to measure the amount of impairment loss, if any, when it is more likely than not that a goodwill impairment exists. The Company did not record any impairment loss for goodwill or indefinite-lived intangible assets for the three and six months ended June 30, 2021 and 2020.

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 9 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:


	June 30,
	2021	2020
Stock options	256,881	46
Convertible preferred stock	742	1,288
Warrants	6,181,997	8,283,447

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 May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40). This update provides guidance to clarify and reduce diversity in an accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that is not within the scope of another Topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. This guidance is effective for the fiscal years and interim periods within those years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements.

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.

Liquidity and Management's Plans

6 Months Ended

Jun. 30, 2021

Liquidity and Management's Plans

Liquidity and Management's Plans

(2) Liquidity and Management’s Plans

As of June 30, 2021, the Company had net working capital of approximately $5.1 million, primarily due to the cash and cash equivalents of $40.2 million, which includes $5.2 million obtained in connection with the acquisition of Obalon, and $17.7 million of deferred issuance costs offset by an accrual of $43.2 million due to the timing of the issuance of the common shares in connection with the equity transaction. For further details see notes 8 and 9 below. The $17.7 million deferred issuance costs and the $43.2 million share abeyance accrual will be reclassed to equity for the third quarter ending September 30, 2021 as those shares were issued in July 2021. The Company’s principal source of liquidity as of June 30, 2021 consisted of approximately $40.2 million of cash and cash equivalents and restricted cash, and $3.4 million of accounts receivable. In addition, the Company had its PPP loan and accrued interest forgiven in full, and paid back the $10.5 million of debt with an institutional investor. 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 reshapecare^TM and ReShape Marketplace as an extension of reshapecare (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 Obalon product line from the recently finalized merger with Obalon that was completed on June 15, 2021. With the recent equity raise the Company believes that it has the flexibility to manage the growth of its expenditures and operations.

COVID-19 Risk and Uncertainties and CARES Act

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 5 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.

Supplemental Balance Sheet Information

6 Months Ended

Jun. 30, 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:


	June 30,		December 31,
	2021		2020
Raw materials	$	1,227	$	174
Sub-assemblies		588		733
Finished goods		1,079		1,337
Total inventory	$	2,894	$	2,244

Prepaid expenses and other current assets:


	June 30,		December 31,
	2021		2020
Prepaid insurance	$	1,114	$	619
Prepaid contract research organization expenses		—		295
Other		257		159
Total prepaid expenses and other current assets	$	1,371	$	1,073

Accrued and other liabilities:


	June 30,		December 31,
	2021		2020
Unissued shares held in abeyance related to the June 2021 exercise of warrants	$	43,218	$	—
Accrued professional services		5,904		446
Payroll and benefits		2,276		1,735
Accrued insurance premium		699		272
Customer deposits		518		398
Taxes		455		265
Other		263		514
Total accrued and other liabilities	$	53,333	$	3,630

On June 28, 2021, the Company entered into a warrant exercise agreement with existing accredited investors. The Company received the proceeds related to this agreement prior to June 30, 2021, however the shares of common stock were issued to the investors in multiple tranches and not all shares were issued as of June 30, 2021. The value related to the shares not issued prior to June 30, 2021 was recorded as an accrual of $43.2 million. The remainder of the shares of common stock related to this accrual were issued during July 2021. Since the shares are in abeyance, the costs associated with the issuance in the amount of $17.7 million were treated as deferred issuance costs, and will be recognized once the shares are issued.

Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets

Goodwill and Intangible Assets

(4) Goodwill and 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 range from 3 to 10 years. The amortization expenses for both the three months ended June 30, 2021 and 2020, was $0.4 million and for both the six months ended June 30, 2021 and 2020 was $0.8 million.

In connection with the merger with Obalon, ReShape recorded $2.7 million of intangible assets related to developed technology. The expected life on the intangible assets is estimated to be 15 years and will be amortized on a straight-line basis. The Company also recorded $21.6 million of goodwill.

The changes in the carrying amount of goodwill were as follows:


Goodwill at December 31, 2020	$	—
Goodwill acquired during the year		21,623
Goodwill at June 30, 2021	$	21,623

Debt

6 Months Ended

Jun. 30, 2021

Debt

Debt

(5) Debt


	June 30,		December 31,
	2021		2020
Asset purchase consideration	$	2,936	$	2,867
Credit agreement		—		9,500
PPP Loan		—		955
Total debt		2,936		13,322
Less: unamortized debt discount		—		545
Less: current portion of debt		2,936		3,609
Debt, noncurrent portion	$	—	$	9,168

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 six months ended June 30, 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 $0.2 million employee retention credit during the three months ended June 30, 2021, and $0.5 million for the six months ended June 30, 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 9 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.

On June 28, 2021, the Company entered into a warrant exercise agreement with existing accredited investors, including the Lender, to exercise certain outstanding warrants, for further details on this transaction see Note 9. The Company used some of the proceeds from this transaction to pay off the $10.5 million of debt outstanding under the credit agreement. At June 30, 2021, there was no outstanding amount under the 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 June 30, 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.

Leases

6 Months Ended

Jun. 30, 2021

Leases

Leases

(6) Leases

The Company has noncancelable operating leases for office and warehouse space in San Clemente and Carlsbad, California, as well as 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 $0.2 million and $0.1 million for the three months ended June 30, 2021 and 2020, respectively, and $0.3 million and $0.2 million for the six months ended June 30, 2021 and 2020, respectively. Variable lease costs were not material.

Supplemental information related to operating leases is as follows:


Balance Sheet Information at June 30, 2021
Operating lease ROU assets	$	632

Operating lease liabilities, current portion	$	664
Operating lease liabilities, long-term portion		-
Total operating lease liabilities	$	664

Cash Flow Information for the Six Months Ended June 30, 2021
Cash paid for amounts included in the measurement of operating leases liabilities	$	165

Maturities of operating lease liabilities were as follows:


Twelve months ending June 30,
2022	$	682
Total lease payments		682
Less: imputed interest		18
Total lease liabilities	$	664

Weighted-average remaining lease term at end of period (in years)		0.9
Weighted-average discount rate at end of period		5.1

Acquisition

6 Months Ended

Jun. 30, 2021

Acquisition

Acquisition

(7) Acquisition

On June 15, 2021, the Company completed the previously announced merger with Obalon, which was treated as a reverse acquisition for accounting purposes, for an aggregate purchase price of $30.6 million. This includes the issuance of 3,340,035 shares of common stock valued at $30.6 million at the closing market price of the day of merger and the cancellation of 2,680,301 shares of common stock. As a result of the controlling interest of the former shareholders of ReShape, for financial statement reporting and accounting purposes, ReShape was considered the acquirer under the acquisition method of accounting in accordance with ASC 805-10-55. The reverse acquisition is deemed a capital transaction in substance whereas the historical assets and liabilities of Obalon before the business combination were replaced with the historical financial statements of ReShape in all future filings with the SEC. Acquisition related costs of $2.3 million were recorded in general and administrative expense for the three and six months of June 30, 2021.

Tangible and intangible assets acquired were recorded based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair value of the net assets acquired was recorded to goodwill. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed, primarily related to inventory, developed technology, goodwill (including the deductibility for tax purposes) and income tax related accruals:


Current assets	$	6,348
Property and equipment, net		848
Right-of-use assets		335
Other assets		1,898
Goodwill		21,623
Developed technology		2,730
Liabilities assumed		(3,220)
Total purchase price		30,562
Less: cash acquired		(5,207)
Total purchase price, net of cash acquired	$	25,355

The size of the Obalon acquisition necessitates use of the allowable measurement period to adequately analyze all the factors used in establishing the asset and liability fair values as of the acquisition date. The preliminary acquisition accounting is based upon the Company’s estimates of fair value. The primary areas of the preliminary acquisition accounting that are not yet finalized include the following: (i) finalizing the review and valuation of property and equipment (including the models, key assumptions, estimates and inputs used), (ii) finalizing the review and valuation of related intangible assets (including key assumptions, inputs and estimates), (iii) finalizing the valuation of certain in-place contracts or contractual relationships (including but not limited to leases), (iv) finalizing our review of certain assets acquired and liabilities assumed, (v) finalizing our estimate of the impact of acquisition accounting on deferred income taxes or liabilities. As the initial acquisition accounting is based on our preliminary assessments, actual values may differ (possibly materially) when final information becomes available that differs from our current estimates. We will continue to evaluate these items, until they are satisfactorily resolved and adjust our acquisition accounting accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by ASC 805.

Goodwill includes expected synergies and other benefits the Company believes will result from the acquisition. The developed technology has been capitalized at fair value as an intangible asset with an estimated life of 15 years. The developed technology was determined using the income approach. This approach determines fair value based on cash flow projections which are discounted to present value using a risk-adjusted rate of return, using nonrecurring Level 3 inputs. The discount rate used was 22.0%.

Equity

6 Months Ended

Jun. 30, 2021

Equity

Equity

(8) Equity

June 2021 Exercises of Warrants for Common Stock

On June 28, 2021, the Company entered into a warrant exercise agreement with existing accredited investors to exercise certain outstanding warrants to purchase up to an aggregate of 7.9 million shares of the Company’s common stock, which 7.1 million of the shares were issued in July in accordance with the terms of the warrant exercise agreement. In consideration for the immediate exercise of the existing warrants for cash, the exercising holders received new unregistered warrants to purchase up to an aggregate of 5.9 million shares (equal to 75% of the shares of common stock issued in connection with the exercise) of the Company’s common stock (the “New Warrants”) in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”). The investors paid a cash purchase price for the New Warrants equal to $0.09375 per share of common stock underlying the New Warrants. In connection with the exercise, the Company also agreed to reduce the exercise price of certain of the existing warrants to $6.00, which is equal to the most recent closing price of the Company’s common stock on The Nasdaq Capital Market prior to the execution of the warrant exercise agreement. For further details on the warrants see Note 9 below.

The gross proceeds to the Company from the Exercise and the sale of the New Warrants was approximately $45.5 million, prior to deducting placement agent fees and estimated offering expenses. The Company used approximately $10.8 million was used to pay off the credit agreement, including $10.5 million of debt and $0.3 million of accrued interest under its secured credit agreement dated March 25, 2020, as amended, see Note 5 above for further details. The Company

intends to use the remainder of the net proceeds for working capital and general corporate purposes.

On June 18, 2021, the Company issued 100,000 shares of common stock to two healthcare focused institutional investors, totaling 200,000 shares of common stock and on June 21, 2021, the Company issued 130,445 and 57,229 shares of common stock to two healthcare focused institutional investors totaling 187,674 shares of common stock, as an exercise of pre-funded warrants issued in connection with the September 2019 private placement transactions. The Company received approximately $0.1 million in connection with the exercises.

On June 18, 2021, the Company issued 91,864 shares of common stock related to the exercise of previous Obalon employees exercising stock option awards. The Company received $0.2 million related to this exercise.

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.

Warrants

6 Months Ended

Jun. 30, 2021

Warrants.

Warrants

(9) Warrants

On June 28, 2021, the Company entered into a warrant exercise agreement with existing accredited investors to exercise certain outstanding warrants. As part of this agreement the Company modified the Series E warrants issued September 23, 2019 from an exercise price of $10.64 per share to $6.00 per share, the Series G warrants issued on March 25, 2020 from an exercise price of $6.56 per share to $6.00 per share, the Series G warrants issued on December 17, 2020 from an exercise price of $6.21 per share to $6.00 per share and the Series G warrants issued on January 21, 2021 from an exercise price of $6.21 per share to $6.00 per share. The company issued a total of 7,929,384 shares of common stock in connection with this transaction and issued an additional 5,947,039 new warrants. These new warrants were valued at $18.5 million using the fair value approach at the time of issuance. The fair value the new warrants was determined using a Black Scholes option pricing model using a risk free rate of 0.898%, an expected term of five year; expected dividends of zero and expected volatility of 97.6%.

On January 19, 2021, the Company issued 1,000,000 Series G Warrants, pre-merger which were adjusted by the exchange ratio in the merger, 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, pre-merger which were adjusted by the exchange ratio in the merger, 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, pre-merger which were adjusted by the exchange ratio in the merger, 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, pre-merger which were adjusted by the exchange ratio in the merger, 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%.

Revenue Disaggregation and Operating Segments

6 Months Ended

Jun. 30, 2021

Revenue Disaggregation and Operating Segments

Revenue Disaggregation and Operating Segments

(10) 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				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
United States	$	2,633	$	1,458	$	5,153	$	3,412
Australia		277		120		570		418
Europe		590		124		969		636
Rest of world		29		—		58		25
Total net revenue	$	3,529	$	1,702	$	6,750	$	4,491

*The next largest individual country outside the United States was the United Kingdom for the three months ended June 30, 2021, which was 4.5% of total revenues, and Australia for the six months ended June 30, 2021, which was 8.5% of total revenues. Australia was the next largest individual country outside the United States for both the three and six months ended June 30, 2020, at 7.0% and 9.3% 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 and six months ended June 30, 2021 and 2020. During the second half of 2020 the Company launched reshapecare, which had minimal revenue for the three and six months ended June 30, 2021 and no revenue for the three and six months ended June 30, 2020. The Company anticipates generating more reshapecare revenue in the second half of 2021. There was no revenue or gross profit recorded for the ReShape Vest or Diabetes Bloc-Stim Neuromodulation for the three and six months ended June 30, 2021 and 2020 as these two products are still in the development stage. There was also no revenue recorded for the recently acquired Obalon line.

- 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
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+ Details

Income Taxes

6 Months Ended

Jun. 30, 2021

Income Taxes

Income Taxes

(11) 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 and six months ended June 30, 2021, a $28 thousand and $53 thousand, respectively, tax expense was recorded, primarily due to projected income in Australia and Netherlands. During the three and six months ended June 30, 2020, a $50 thousand and $68 thousand, respectively, tax benefit was recorded, primarily related to projected losses in Australia.

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.

Additionally, as stated above, upon completion of the business combination on June 16, 2021 with Obalon Therapeutics, Inc. (“Obalon”), the transaction was treated as a “reverse acquisition” for financial accounting purposes. Due to the fact that more than 50% of the former ReShape shareholders retained ownership in the newly consolidated group, it is intended to be treated as a reverse acquisition for tax purposes as well.

- 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

Stock-based Compensation

6 Months Ended

Jun. 30, 2021

Stock-based Compensation

Stock-based Compensation

(12) 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 and six months ended June 30, 2021 and 2020 were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
General and administrative	$	(364)		347	$	(263)	$	774
Total stock-based compensation expense	$	(364)	$	347	$	(263)	$	774

As part of the merger agreement with Obalon, all of the outstanding, vested and unvested stock option awards granted by ReShape were forfeited and cancelled. As a result of this the Company reversed the previously recognized expense for the unvested awards at the time the merger was completed. As of June 30, 2021, there are no outstanding awards related to ReShape’s stock incentive plan. There are no unvested shares under the Obalon stock incentive plan. No stock awards have been granted during the three and six months ended June 30, 2021 under either the ReShape or Obalon stock incentive plans.

Commitments and Contingencies

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies

Commitments and Contingencies

(13) 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.

Subsequent Events

6 Months Ended

Jun. 30, 2021

Subsequent Events

Subsequent Events

(14) Subsequent Events

Exchange Agreement

On July 16, 2021, the Company entered into an exchange agreement (the “Exchange Agreement”) with existing institutional investors (the “Investors”) to exchange certain outstanding warrants (the “Exchange Warrants”) for shares of common stock and new warrants to purchase common stock. The investors held common stock purchase warrants issued by the Company prior to the merger with Obalon. The merger constituted a fundamental transaction under the Exchange Warrants and, as a result thereof, pursuant to the terms and conditions of the Exchange Warrants, the investors were entitled to a cash payment equal to the Black Scholes value of the Exchange Warrants, calculated in accordance with the terms of the Exchange Warrants (the “Black Scholes Payment”).

Subject to the terms and conditions set forth in the Exchange Agreement and in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), in lieu of the Black Scholes Payment, the Company and the Investors agreed to exchange all of the Exchange Warrants for (a) a total of 504,861 shares of common stock, which was calculated by dividing the Black Scholes Payment by $4.038, which was equal to 95% of the closing market price of the Company’s common stock on The Nasdaq Capital Market on July 16, 2021 and (b) new warrants to purchase up to a total of 400,000 shares of common stock at an exercise price equal to $4.038 with a term of five years.

Restricted Stock Unit Grants

On July 22, 2021, the Company issued a total of 3,610,572 restricted stock unit (“RSUs”) grants to certain members of the management team and the board of directors. The non-employee board members received a total of 1,244,208 RSUs, 50% of which vested immediately and 50% of which will vest on January 1, 2022. The management team received a total of 2,366,364 RSUs, a portion of which vested immediately based on the grantee’s duration of service with the Company and the remainder of which will vest monthly for up to 36 months.

Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2021

Basis of Presentation

Basis of Presentation

Acquisition

Goodwill and Long-Lived Assets

Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.

Fair Value of Financial Instruments

Net Loss Per Share


	June 30,
	2021	2020
Stock options	256,881	46
Convertible preferred stock	742	1,288
Warrants	6,181,997	8,283,447

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.

Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2021

Basis of Presentation

Schedule of anti-dilutive securities


	June 30,
	2021	2020
Stock options	256,881	46
Convertible preferred stock	742	1,288
Warrants	6,181,997	8,283,447

Supplemental Balance Sheet Information (Tables)

6 Months Ended

Jun. 30, 2021

Supplemental Balance Sheet Information

Schedule of components of inventory


	June 30,		December 31,
	2021		2020
Raw materials	$	1,227	$	174
Sub-assemblies		588		733
Finished goods		1,079		1,337
Total inventory	$	2,894	$	2,244

Schedule of components of prepaid expenses and other current assets


	June 30,		December 31,
	2021		2020
Prepaid insurance	$	1,114	$	619
Prepaid contract research organization expenses		—		295
Other		257		159
Total prepaid expenses and other current assets	$	1,371	$	1,073

Schedule of components of accrued and other liabilities


	June 30,		December 31,
	2021		2020
Unissued shares held in abeyance related to the June 2021 exercise of warrants	$	43,218	$	—
Accrued professional services		5,904		446
Payroll and benefits		2,276		1,735
Accrued insurance premium		699		272
Customer deposits		518		398
Taxes		455		265
Other		263		514
Total accrued and other liabilities	$	53,333	$	3,630

Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets

Schedule of changes in the carrying amount of goodwill


Goodwill at December 31, 2020	$	—
Goodwill acquired during the year		21,623
Goodwill at June 30, 2021	$	21,623

Debt (Tables)

6 Months Ended

Jun. 30, 2021

Debt

Schedule of Long-term Debt Instruments [Table Text Block]


	June 30,		December 31,
	2021		2020
Asset purchase consideration	$	2,936	$	2,867
Credit agreement		—		9,500
PPP Loan		—		955
Total debt		2,936		13,322
Less: unamortized debt discount		—		545
Less: current portion of debt		2,936		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.

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

Leases (Tables)

6 Months Ended

Jun. 30, 2021

Leases

Schedule of supplemental information related to operating leases


Balance Sheet Information at June 30, 2021
Operating lease ROU assets	$	632

Operating lease liabilities, current portion	$	664
Operating lease liabilities, long-term portion		-
Total operating lease liabilities	$	664

Cash Flow Information for the Six Months Ended June 30, 2021
Cash paid for amounts included in the measurement of operating leases liabilities	$	165

Schedule of maturities of operating lease liabilities


Twelve months ending June 30,
2022	$	682
Total lease payments		682
Less: imputed interest		18
Total lease liabilities	$	664

Weighted-average remaining lease term at end of period (in years)		0.9
Weighted-average discount rate at end of period		5.1

Acquisitions (Tables)

6 Months Ended

Jun. 30, 2021

Acquisition

Schedule of fair values of the assets acquired and liabilities assumed


Current assets	$	6,348
Property and equipment, net		848
Right-of-use assets		335
Other assets		1,898
Goodwill		21,623
Developed technology		2,730
Liabilities assumed		(3,220)
Total purchase price		30,562
Less: cash acquired		(5,207)
Total purchase price, net of cash acquired	$	25,355

Revenue Disaggregation and Operating Segments (Tables)

6 Months Ended

Jun. 30, 2021

Revenue Disaggregation and Operating Segments

Schedule of revenue disaggregated by product and geography


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
United States	$	2,633	$	1,458	$	5,153	$	3,412
Australia		277		120		570		418
Europe		590		124		969		636
Rest of world		29		—		58		25
Total net revenue	$	3,529	$	1,702	$	6,750	$	4,491

Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2021

Stock-based Compensation

Schedule of stock-based compensation expense


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
General and administrative	$	(364)		347	$	(263)	$	774
Total stock-based compensation expense	$	(364)	$	347	$	(263)	$	774

Basis of Presentation - Anti-dilutive Securities (Details) - shares	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Employees
Anti-dilutive securities
Anti-dilutive securities (in shares)	256,881	46
Convertible preferred stock
Anti-dilutive securities
Anti-dilutive securities (in shares)	742	1,288
Warrants to purchase common stock
Anti-dilutive securities
Anti-dilutive securities (in shares)	6,181,997	8,283,447

Liquidity and Management's Plans (Details) - USD ($) $ in Thousands			3 Months Ended	6 Months Ended
	Jun. 28, 2021	Jun. 15, 2021	Jun. 30, 2021	Jun. 30, 2021	Dec. 31, 2020	Jun. 30, 2020	Dec. 31, 2019
Liquidity, Going Concern and Management's Plans
Working capital			$ (5,100)	$ (5,100)
Equity related transaction accrual			43,218	43,218
Deferred issuance cost for shares held in abeyance			17,705	17,705
Cash and cash equivalents and restricted cash			40,213	40,213	$ 3,007	$ 1,576	$ 2,985
Cash and cash equivalents			40,163	40,163	2,957
Cash acquired		$ 5,207		5,200
Deferred offering costs			17,705	17,705
Accounts receivable			$ 3,422	3,422	$ 2,620
Payment of credit agreement				10,500
Credit agreement
Liquidity, Going Concern and Management's Plans
Payment of credit agreement	$ 10,500			$ 10,500

Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Inventory:
Raw materials	$ 1,227	$ 174
Sub-assemblies	588	733
Finished goods	1,079	1,337
Total inventory	2,894	2,244
Prepaid expenses and other current assets:
Prepaid insurance	1,114	619
Prepaid contract research organization expenses		295
Other	257	159
Total prepaid expenses and other current assets	1,371	1,073
Accrued and other liabilities:
Unissued shares held in abeyance related to the June 2021 exercise of warrants	43,218
Deferred offering costs	17,705
Accrued professional services	5,904	446
Payroll and benefits	2,276	1,735
Accrued insurance premium	699	272
Customer deposits	518	398
Taxes	455	265
Other	263	514
Total accrued and other liabilities	$ 53,333	$ 3,630

Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Jun. 15, 2021
Acquisition.
Amortization expense	$ 400	$ 400	$ 828	$ 833
Goodwill	21,623		21,623		$ 21,623
Obalon Therapeutics Inc.
Acquisition.
Goodwill	$ 21,600		$ 21,600
Developed technology
Acquisition.
Useful life			15 years
Developed technology \| Obalon Therapeutics Inc.
Acquisition.
Intangible assets acquired			$ 2,700
Useful life			15 years
Minimum
Acquisition.
Useful Life (years)			3 years
Maximum
Acquisition.
Useful Life (years)			10 years

Goodwill and Intangible Assets - Roll Forward (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)
Goodwill [Roll Forward]
Goodwill acquired during the year	$ 21,623
Goodwill at June 30, 2021	$ 21,623

Debt - Long term debt (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Total debt	$ 2,936		$ 13,322
Less: unamortized debt discount		$ 100	545
Less: current portion of debt	2,936		3,609
Debt, noncurrent portion			9,168
Asset purchase consideration
Debt Instrument [Line Items]
Total debt	$ 2,936		2,867
Credit agreement
Debt Instrument [Line Items]
Total debt			9,500
PPP Loan
Debt Instrument [Line Items]
Total debt			$ 955

Debt - CARES Act (Details) - USD ($) $ in Thousands		3 Months Ended	6 Months Ended
Debt - CARES Act (Details) - USD ($) $ in Thousands	Apr. 24, 2020	Jun. 30, 2021	Jun. 30, 2021	Jun. 30, 2020
Debt Instrument [Line Items]
Amount received				$ 955
Gain on extinguishment of debt		$ (101)	$ (2,061)
Employee retention credit		$ 200	500
PPP Loan
Debt Instrument [Line Items]
Amount received	$ 1,000
Discount rate (as a percent)	1.00%
Gain on extinguishment of debt			$ 1,000

Debt - Credit agreement (Details) - USD ($) $ / shares in Units, $ in Thousands									3 Months Ended		6 Months Ended
	Jun. 28, 2021	Jan. 19, 2021	Dec. 16, 2020	Sep. 14, 2020	Jul. 29, 2020	Jun. 23, 2020	Apr. 15, 2020	Mar. 25, 2020	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Short-term Debt [Line Items]
Amount received												$ 955
Loss on extinguishment of debt, net									$ 101		$ 2,061
Debt discount										$ 100			$ 545
Warrant exercise price (in dollars per share)							$ 0.12
Proceeds from warrant exercises							$ 600				45,616	$ 610
Payment of credit agreement											10,500
Total debt									2,936		2,936		13,322
Credit agreement
Short-term Debt [Line Items]
Agreement amount								$ 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 warrant exercises							$ 600
Payment of credit agreement	$ 10,500										10,500
Total debt									$ 0		$ 0
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%
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

Debt - Asset Purchase Consideration Payable (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)
Long-term debt
Total debt	$ 2,936	$ 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

Leases - Supplemental Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Leases
Operating lease costs	$ 200	$ 100	$ 300	$ 200
Balance Sheet Information related to operating leases
Operating lease ROU assets	632		632		$ 465
Operating lease liabilities, current	664		664		314
Operating lease liabilities, long-term portion					$ 163
Total operating lease liabilities	$ 664		664
Cash Flow Information related to operating leases
Cash paid for amounts included in the measurement of operating leases liabilities			$ 165

Leases - Maturities of Liabilities (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Maturities of operating lease liabilities
2022	$ 682
Total lease payments	682
Less: imputed interest	18
Total lease liabilities	$ 664
Weighted-average remaining lease term at end of period (in years)	10 months 24 days
Weighted-average discount rate at end of period	5.10%

Acquisition (Details) - Obalon Therapeutics Inc. - USD ($) $ in Millions		3 Months Ended	6 Months Ended
	Jun. 15, 2021	Jun. 30, 2021	Jun. 30, 2021
Acquisitions
Aggregate purchase price	$ 30.6
Issuance of shares of common stock	3,340,035
Shares issued value	$ 30.6
Cancellation of shares	2,680,301
General and administrative expense
Acquisitions
Acquisition related costs		$ 2.3	$ 2.3

Acquisition - Fair value of assets acquired and liabilities assumed (Details) - USD ($) $ in Thousands		6 Months Ended
	Jun. 15, 2021	Jun. 30, 2021
Fair values of the assets acquired and liabilities assumed
Current assets	$ 6,348
Property and equipment, net	848
Right-of-use assets	335
Other assets	1,898
Goodwill	21,623	$ 21,623
Developed technology	2,730
Liabilities assumed	(3,220)
Total purchase price	30,562
Less: cash acquired	(5,207)	(5,200)
Total purchase price, net of cash acquired	$ 25,355	$ 25,355

Acquisition - Narrative (Details)	6 Months Ended
Acquisition - Narrative (Details)	Jun. 30, 2021
Developed technology
Acquisition.
Useful life	15 years
Discount rate \| Income approach
Acquisition.
Discount rate	22.0

Equity - Issuance of stock and warrants (Details) $ / shares in Units, $ in Thousands								3 Months Ended		6 Months Ended
	Jun. 28, 2021 USD ($) $ / shares shares	Jun. 21, 2021 USD ($) individual shares	Jun. 18, 2021 USD ($) individual shares	Dec. 03, 2020 USD ($) individual shares	Jun. 23, 2020 shares	May 28, 2020 USD ($) shares	Apr. 15, 2020 USD ($) $ / shares shares	Jun. 30, 2021 shares	Jun. 30, 2020 USD ($) shares	Jun. 30, 2021 USD ($) shares	Jun. 30, 2020 USD ($) shares	Jun. 27, 2021 $ / shares
Equity
Cashless exercise of warrants (in shares)					58,981
Common stock issued for professional services (in shares)						50,000
Common stock issued for professional services \| $						$ 200			$ 205		$ 205
Institutional exercise of warrants (in shares)							5,085,834
Warrant exercise price (in dollars per share) \| $ / shares							$ 0.12
Payment of credit agreement \| $										$ 10,500
Proceeds from warrant exercises \| $							$ 600			45,616	$ 610
Number of healthcare focused institutional investors \| individual		2	2
Stock issued (in shares)			100,000
Issuance of common stock upon exercise of warrants, net of transaction costs (in shares)			200,000
Stock options exercised (in shares)			91,864
Proceeds from stock options exercised \| $			$ 200							216
Credit agreement
Equity
Warrant exercise price (in dollars per share) \| $ / shares							$ 0.12
Payment of credit agreement \| $	$ 10,500									$ 10,500
Proceeds from warrant exercises \| $							$ 600
Number of shares in exchange of warrant exercise							5,085,834
2019 private placement
Equity
Proceeds from warrant exercises \| $		$ 100		$ 100
Number of healthcare focused institutional investors \| individual				2
Stock issued (in shares)		130,445		290,000
Issuance of common stock upon exercise of warrants, net of transaction costs (in shares)		187,674		580,000
June 2021 warrants
Equity
Proceeds from warrant exercises \| $	$ 45,500
Issuance of common stock upon exercise of warrants, net of transaction costs (in shares)	7,929,384
June 2021 warrants \| Credit agreement
Equity
Payment of credit agreement \| $	$ 10,500
Accrued interest \| $	300
Proceeds to repay \| $	$ 10,800
Series E warrants
Equity
Warrant exercise price (in dollars per share) \| $ / shares	$ 6.00											$ 10.64
New Unregistered Warrants
Equity
Warrant exercise price (in dollars per share) \| $ / shares	$ 6.00
Issuance of common stock upon exercise of warrants, net of transaction costs (in shares)	7,100,000
Number of shares in exchange of warrant exercise	5,947,039
Percentage of common stock issued	75.00%
Cash purchase price per share \| $ / shares	$ 0.09375
Common Stock
Equity
Cashless exercise of warrants (in shares)									58,981		58,981
Common stock issued for professional services (in shares)									50,000		50,000
Institutional exercise of warrants (in shares)								1,250,470	5,085,834	1,250,470	5,085,834
Stock options exercised (in shares)								91,864		91,864
Cancellation of shares								2,680,301		2,680,301
Common Stock \| 2019 private placement
Equity
Stock issued (in shares)		57,229

Warrants (Details) $ / shares in Units, $ in Millions	Jun. 28, 2021 USD ($) Y $ / shares shares	Jun. 18, 2021 shares	Jan. 19, 2021 USD ($) Y shares	Dec. 16, 2020 USD ($) Y shares	Sep. 14, 2020 USD ($) Y shares	Mar. 25, 2020 USD ($) Y shares	Jun. 27, 2021 $ / shares	Apr. 15, 2020 $ / shares
Class of Warrant or Right [Line Items]
Exercise price of warrants (in dollars per share)								$ 0.12
Issuance of common stock \| shares		200,000
Series E warrants
Class of Warrant or Right [Line Items]
Exercise price of warrants (in dollars per share)	$ 6.00						$ 10.64
Series G Warrants
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
Series G Warrants \| Risk Free Rate
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			0.0045	0.0037	0.0027	0.0056
Series G Warrants \| Remaining Life
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| Y			5	5	5	5
Series G Warrants \| Expected dividends
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			0	0	0	0
Series G Warrants \| Volatility
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			0.971	1.008	1.011	0.9700
Series G Warrants Issued March 25, 2020
Class of Warrant or Right [Line Items]
Exercise price of warrants (in dollars per share)	6.00						6.56
Series G Warrants Issued December 17, 2020
Class of Warrant or Right [Line Items]
Exercise price of warrants (in dollars per share)	6.00						6.21
Series G Warrants Issued January 21, 2021
Class of Warrant or Right [Line Items]
Exercise price of warrants (in dollars per share)	$ 6.00						$ 6.21
June 2021 warrants
Class of Warrant or Right [Line Items]
Issuance of common stock \| shares	7,929,384
New Unregistered Warrants
Class of Warrant or Right [Line Items]
Exercise price of warrants (in dollars per share)	$ 6.00
Issuance of common stock \| shares	7,100,000
Warrants purchased \| shares	5,947,039
Fair value portion of warrants \| $	$ 18.5
New Unregistered Warrants \| Risk Free Rate
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.00898
New Unregistered Warrants \| Remaining Life
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| Y	5
New Unregistered Warrants \| Expected dividends
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0
New Unregistered Warrants \| Volatility
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.976

Revenue Disaggregation and Operating Segments (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021 USD ($) item	Jun. 30, 2020 USD ($) item	Jun. 30, 2021 USD ($) item	Jun. 30, 2020 USD ($) item
Revenue Recognition
Revenue	$ 3,529	$ 1,702	$ 6,750	$ 4,491
Number of Products in Development Stage \| item	2	2	2	2
United States
Revenue Recognition
Revenue	$ 2,633	$ 1,458	$ 5,153	$ 3,412
Australia
Revenue Recognition
Revenue	277	120	570	418
Europe
Revenue Recognition
Revenue	590	124	969	636
Rest of world
Revenue Recognition
Revenue	29		58	25
ReshapeCare product
Revenue Recognition
Revenue		0		0
ReShape Vest and Diabetes Bloc-Stim Neuromodulation Products
Revenue Recognition
Revenue	$ 0	$ 0	$ 0	$ 0
Revenues \| Geographic area \| Australia
Revenue Recognition
Percentage of total		7.00%	8.50%	9.30%
Revenues \| Geographic area \| Great Britain
Revenue Recognition
Percentage of total	4.50%

Income Taxes - Income Tax Benefit (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Taxes
Percentage of shareholders retained ownership	50.00%		50.00%
Current:
Income tax expense (benefit)	$ 28	$ (50)	$ 53	$ (68)

- Definition

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

+ References + Details

Stock-based Compensation - Expense for Stock-Based Awards (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Compensation expense recognized
Stock-based compensation expense	$ (364)	$ 347	$ (263)	$ 774
Employees \| 2003 Stock Incentive Plan, as amended and restated
Compensation expense recognized
Outstanding shares	0		0
Employees \| Obalon Stock Incentive Plan
Compensation expense recognized
Unvested Shares	0		0
Employees \| Reshape or Obalon Stock Incentive Plan
Compensation expense recognized
Options granted (in shares)	0		0
Stock options granted	0		0
General and administrative expense
Compensation expense recognized
Stock-based compensation expense	$ (364)	$ 347	$ (263)	$ 774

Subsequent Events (Details) - $ / shares	Jul. 22, 2021	Jul. 16, 2021	Apr. 15, 2020
Subsequent Events
Warrant exercise price (in dollars per share)			$ 0.12
Subsequent Event
Subsequent Events
Warrants exercise price expressed		95.00%
Subsequent Event \| Restricted Stock Units (RSUs)
Subsequent Events
Restricted stock units	2,366,364
Vesting Period	36 months
Subsequent Event \| Restricted Stock Units (RSUs) \| Vest immediately
Subsequent Events
Vesting percentage	50.00%
Subsequent Event \| Restricted Stock Units (RSUs) \| Vest on January 1, 2022
Subsequent Events
Vesting percentage	50.00%
Subsequent Event \| Restricted Stock Units (RSUs) \| Management Team
Subsequent Events
Restricted stock units	3,610,572
Subsequent Event \| Restricted Stock Units (RSUs) \| Non-employee board members
Subsequent Events
Restricted stock units	1,244,208
Subsequent Event \| Exchange Warrants
Subsequent Events
Number of shares in exchange of warrant exercise		504,861
Warrant exercise price (in dollars per share)		$ 4.038
Subsequent Event \| New Warrants
Subsequent Events
Warrant exercise price (in dollars per share)		$ 4.038
Warrants term		5 years
Subsequent Event \| Maximum \| New Warrants
Subsequent Events
Number of shares in exchange of warrant exercise		400,000