0001558370-22-005238 | 10-K | XBRL Viewer

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2021	Apr. 06, 2022	Jun. 30, 2021
Cover [Abstract]
Document Type	10-K
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2021
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 Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
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		18,645,370
Entity Public Float			$ 37,324,000
Auditor Name	BDO USA, LLP
Auditor Firm ID	243
Auditor Location	Costa Mesa, California
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY
Entity Central Index Key	0001427570
Amendment Flag	false
ICFR Auditor Attestation Flag	false

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 22,765	$ 2,957
Restricted cash	50	50
Accounts and other receivables (net of allowance for doubtful accounts of $1,172 and $968 respectively)	2,815	2,620
Inventory	3,003	2,244
Prepaid expenses and other current assets	1,622	1,073
Total current assets	30,255	8,944
Property and equipment, net	1,454	584
Operating lease right-of-use assets	266	465
Other intangible assets, net	20,827	27,022
Other assets	1,456	46
Total assets	54,258	37,061
Current liabilities:
Accounts payable	3,468	3,655
Accrued and other liabilities	3,169	3,630
Warranty liability, current	415	397
Debt, current portion, net of deferred financing costs		3,609
Operating lease liabilities, current	279	314
Total current liabilities	7,331	11,605
Debt, noncurrent portion		9,168
Operating lease liabilities, noncurrent		163
Warranty liability, noncurrent	300	1,022
Deferred income taxes	555	615
Total liabilities	8,186	22,573
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 100,000,000 and 275,000,000 shares authorized at December 31, 2021 and December 31, 2020, respectively; 17,831,875 and 3,486,253 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively	18	4
Additional paid-in capital	622,906	529,431
Accumulated deficit	(576,760)	(514,827)
Accumulated other comprehensive loss	(92)	(121)
Total stockholders' equity	46,072	14,488
Total liabilities and stockholders' equity	54,258	37,061
Series B convertible preferred stock
Stockholders' equity:
Preferred stock, Value
Series C convertible preferred stock
Stockholders' equity:
Preferred stock, Value		$ 1

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Allowance for bad debts	$ 1,172	$ 968
Preferred stock, authorized	10,000,000	10,000,000
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	17,831,875	3,486,253
Common stock, shares outstanding	17,831,875	3,486,253
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

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Consolidated Statements of Operations
Revenue	$ 13,600	$ 11,299
Cost of revenue	5,252	5,037
Gross profit	8,348	6,262
Operating expenses:
Sales and marketing	9,165	4,694
General and administrative	24,410	10,527
Research and development	2,522	3,498
Loss on impairment of intangible asset and goodwill	28,752
Total operating expenses	64,849	18,719
Operating loss	(56,501)	(12,457)
Other expense (income), net:
Interest expense, net	832	2,049
Warrant expense	2,813
Loss on extinguishment of debt, net	2,061	7,715
Gain on foreign currency exchange, net	(168)	(410)
Loss before income tax provision	(62,039)	(21,811)
Income tax benefit	(106)	(181)
Net loss	$ (61,933)	$ (21,630)
Net loss per share - basic and diluted:
Net loss per share - basic (in dollars per share)	$ (5.00)	$ (5.54)
Net loss per share - diluted (in dollars per share)	$ (5.00)	$ (5.54)
Shares used to compute basic net loss per share	12,378,502	3,904,762
Shares used to compute diluted net loss per share	12,378,502	3,904,762

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Consolidated Statements of Comprehensive Loss
Net loss	$ (61,933)	$ (21,630)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	29	(113)
Other comprehensive income (loss), net of tax	29	(113)
Comprehensive loss	$ (61,904)	$ (21,743)

- 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

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Preferred Stock Series B convertible preferred stock	Preferred Stock Series C convertible preferred stock	Common Stock Restricted Shares	Common Stock	Additional Paid-in Capital Restricted Shares	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Unvested restricted stock units	Restricted Shares	Total
Balance at Dec. 31, 2019		$ 1				$ 517,311	$ (493,197)	$ (8)			$ 24,107
Balance (in shares) at Dec. 31, 2019	3	95,388		230,989
Changes in Stockholders' (Deficit) Equity
Net loss							(21,630)				(21,630)
Other comprehensive income (loss), net of tax								(113)			(113)
Stock-based compensation expense, net						1,323					1,323
Issuance of warrants						9,917					9,917
Institutional exercise of warrants				$ 4		675					679
Institutional exercise of warrants (in shares)				3,193,831
Cashless exercise of warrants (in shares)				33,248
Common stock issued for professional services						205					205
Common stock issued for professional services (in shares)				28,185
Balance at Dec. 31, 2020		$ 1		$ 4		529,431	(514,827)	(121)			14,488
Balance (in shares) at Dec. 31, 2020	3	95,388		3,486,253
Changes in Stockholders' (Deficit) Equity
Net loss							(61,933)				(61,933)
Other comprehensive income (loss), net of tax								29			29
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
Stock-based compensation expense, net						12,752					12,752
Stock options exercised						416					416
Stock options exercised (in shares)				182,696
Issuance of stock from RSUs			$ 2		$ (2)
Issuance of stock from RSUs (in shares)			1,899,254						1,899,254
Issuance of warrants						4,508					4,508
Institutional exercise of warrants				$ 9		44,636					44,645
Institutional exercise of warrants (in shares)				8,886,137
Warrant liability reclassified to equity						476					476
Common stock issued for professional services					$ 130					$ 130
Common stock issued for professional services (in shares)			37,500
Balance at Dec. 31, 2021				$ 18		$ 622,906	$ (576,760)	$ (92)			$ 46,072
Balance (in shares) at Dec. 31, 2021		95,388		17,831,875

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities:
Net loss	$ (61,933)	$ (21,630)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	232	15
Amortization of intangible assets	1,739	1,652
Noncash interest expense	133	230
Loss on impairment of intangible asset and goodwill	28,752
Loss on extinguishment of debt, net	2,061	7,715
Stock-based compensation	12,752	1,323
Bad debt expense	89	259
Provision for inventory excess and obsolescence	294	248
Warrant expense	2,813
Amortization of debt discount and deferred debt issuance costs	494	1,697
Deferred income tax benefit	(60)	(86)
Other noncash items		21
Change in operating assets and liabilities, net of business combination:
Accounts and other receivables	(284)	1,217
Inventory	(369)	(1,175)
Prepaid expenses and other current assets	(393)	843
Accounts payable and accrued liabilities	(1,480)	(992)
Warranty liability	(703)	61
Other	488	52
Net cash used in operating activities	(15,375)	(8,550)
Cash flows from investing activities:
Capital expenditures	(352)	(390)
Acquisition of Lap-Band product line assets	(3,000)	(2,000)
Proceeds received from acquisition	5,207
Cash provided by (used in) investing activities:	1,855	(2,390)
Cash flows from financing activities:
Payments of financing costs	(3,234)	(59)
Proceeds from institutional exercise of warrants	45,616	679
Proceeds from stock options exercised	417
Proceeds from credit agreement	1,000	9,500
Payment of credit agreement	(10,500)
Proceeds from PPP loan		955
Net cash provided by financing activities	33,299	11,075
Effect of currency exchange rate changes on cash and cash equivalents	29	(113)
Net increase in cash, cash equivalents and restricted cash	19,808	22
Cash, cash equivalents and restricted cash at beginning of period	3,007	2,985
Cash, cash equivalents and restricted cash at end of period	22,815	3,007
Supplemental disclosure:
Cash paid for income taxes	102	40
Cash paid for interest	296
Noncash investing and financing activities:
Purchase price, net of cash received	25,355
Fair value of warrants included as a component of loss on extinguishment of debt	2,974	8,523
Fair value of common stock and warrants issued related to the fundamental transaction exchange	2,813
Fair value of common stock issued for professional services	97
Capital expenditures accruals	$ 5	193
Relative fair value of warrants classified as debt issuance costs		$ 1,393

Description of the Business and Risks and Uncertainties

12 Months Ended

Dec. 31, 2021

Description of the Business and Risks and Uncertainties

Description of the Business and Risks and Uncertainties

(1)

Description of the Business and Risks and Uncertainties

Description of Business

We were incorporated under the laws of Delaware on January 2, 2008. On June 15, 2021, we completed a merger with ReShape Lifesciences Inc. Pursuant to the Merger Agreement, a wholly owned subsidiary of Obalon merged with and into ReShape, with ReShape surviving the merger as a wholly owned subsidiary of Obalon. As a result of the merger, Obalon, the parent company, was renamed “ReShape Lifesciences Inc.” and ReShape was named ReShape Weightloss Inc. ReShape Lifesciences’ shares of common stock trade on the Nasdaq under the symbol RSLS.

ReShape Medical (formerly ReShape Lifesciences Inc.) was incorporated in the state of Minnesota in December 2002 and reincorporated in the state of Delaware in July 2004. In 2017, the Company changed its name from EnteroMedics Inc. to ReShape Lifesciences Inc.

The Company is headquartered in San Clemente, California. The Company is a developer of minimally invasive medical devices that advance bariatric surgery to treat obesity and metabolic diseases. The Company’s current portfolio consists of the Lap-Band^® Adjustable Gastric Banding System, reshapecare^TM virtual health coaching program, ReShape Market Place, including ReShape Optimize^TM a supplemental multivitamin, the Obalon Balloon System, the first and only swallowable gas filled balloon system, the ReShape Vest^TM, an investigational device to help treat more patients with obesity and the Diabetes Bloc-Stim Neuromodulation, a technology under development as a new treatment for type 2 diabetes mellitus. The Company sells the Lap-Band worldwide and is managed in the following geographical regions: United States, Australia, Europe and the rest of world. Refer to Note 13 for additional information about operating segments.

Risks and Uncertainties

The Company continues to devote significant resources to developing its product technology, commercialization activities and raising capital. These activities are subject to significant risks and uncertainties, including the ability to obtain additional financing, and there can be no assurance that the Company will be successful in obtaining additional financing on favorable terms, or at all. If adequate funds are not available, the Company may have to further reduce its cost structure until financing is obtained and/or delay development, or commercialization of products, or license to third parties the rights to commercialize products, or technologies that the Company would otherwise seek to commercialize.

The medical device industry is characterized by frequent and extensive litigation and administrative proceedings over patent and other intellectual property rights. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often difficult to predict, and the outcome may be uncertain until the court has entered final judgment and all appeals are exhausted. The Company’s competitors may assert that its products or the use of the Company’s products are covered by U.S. or foreign patents held by them. Refer to Note 16 for additional information about contingencies and litigation matters.

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 also identified temporary headcount reductions and made the decision to furlough a portion of its workforce. On June 15, 2020, the Company ended the temporary pay reductions and the furloughed employees returned to work. During the second quarter of 2020, certain government-mandated closures began to ease and many areas throughout the world and within the United States began to allow elective surgeries. As a result of the easing, the Company did see sales volumes improve as we progressed through the third quarter. During the fourth quarter of 2020 and throughout 2021, there were additional surges in COVID-19 as multiple variants, such as the Delta and Omicron strands. As a result, various territories within the U.S. and around the world took precautions and slowdown, or in some cases a shutdown elective surgery. As the COVID-19 pandemic still surges, many researchers and medical professionals predict it will become an endemic. To the extent to which the COVID-19 global measures taken in

response to the continuing variants and cases, the future impact to the Company’s business, results of operations, and financial condition are highly uncertain and are difficult to predict.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(2)

Summary of Significant Accounting Policies

Basis of Presentation

The Company has prepared the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Reverse Stock Splits

On June 15, 2021, and immediately prior to the closing of the merger, the Company effected a 1-for-3 reverse stock split. Accordingly, all share and per share amounts for the periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the reverse stock split. No fractional shares were issued in connection with the reverse stock split. Unless otherwise noted, all references to shares of the Company’s common stock and per share amounts have also been adjusted to reflect the exchange ratio of 0.5367 Obalon shares for one ReShape share in connection with the merger.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

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 general and administrative 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, 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 Financial Accounting Standards Board (“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, for further details see Note 10.

Cash and Cash Equivalents

The Company considers highly liquid investments generally with maturities of 90 days or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The Company’s cash equivalents are primarily in money market funds and certificates of deposit. The Company deposits its cash and cash equivalents in high-quality credit institutions.

Restricted Cash

Restricted cash represents $50 thousand related to a collateral money market account maintained by the Company as collateral in connection with corporate credit cards with Silicon Valley Bank at December 31, 2021 and 2020.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets to the same total reported in the consolidated statements of cash flows (in thousands):


	December 31,		December 31,
	2021		2020
Cash and cash equivalents	$	22,765	$	2,957
Restricted cash		50		50
Total cash, cash equivalents, and restricted cash in the consolidated statement of cash flows	$	22,815	$	3,007

Accounts Receivable

The majority of the Company’s accounts receivable arise from direct product sales and sales of products under consignment aggrangements, and have payment terms that generally require payment within 30 to 90 days. The Company provides reserves against accounts receivable for estimated losses that may result form a customer’s inability to pay based on customer-specific analysis and general matters such as current assessments of past due balances, economic conditions and forecasts, and historical credit loss activity. Amounts determined to be uncollectible are charged or written-off against the reserve.

At December 31, 2021, the Company had one customer that accounted for 24% of the Company’s total accounts receivable. This customer is in good standing with the Company and there has been no reserves recorded against the outstanding balance.

Inventory

The Company accounts for inventory at the lower of cost or net realizable value, where net realizable value is based on market prices less costs to sell. The Company establishes inventory reserves for obsolescence based upon specific identification of expired or unusable units with a corresponding provision included in cost of revenue. The allowance for excess and slow-moving inventory was $0.8 million and $0.1 million at December 31, 2021 and 2020, respectively. The Company recorded a measurement period adjustment of $0.5 million, for further details see Note 6.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over their estimated useful lives of five to seven years for furniture and equipment and three to five years for computer hardware and software. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful life or the term of the lease. Upon retirement or sale, the cost and related accumulated depreciation or amortization are removed from the Consolidated Balance Sheets and the resulting gain or loss is reflected in the Consolidated Statements of Operations. Repairs and maintenance are expensed as incurred.

Goodwill and Other 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 FASB 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 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, recorded an impairment to goodwill and an IPR&D intangible assets for the year ended December 31, 2021, and did not record any impairment loss for goodwill or indefinite-lived intangible assets for the year ended December 31, 2020, for further details see Note 6 and Note 7.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance for deferred income tax assets is recorded when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The Company’s policy is to classify interest and penalties related to income taxes as income tax expense in the consolidated statements of operations.

Equity

Certain issuances of the Company’s convertible preferred stock and warrants classified within equity contain non-standard down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. The value of the effect of the down round feature when it is triggered is recorded similar to a dividend and as a numerator adjustment in the basic earnings per share calculation.

Foreign Currency

When the local currency of the Company's foreign subsidiaries is the functional currency, all assets and liabilities are translated into United States dollars at the rate of exchange in effect at the balance sheet date. Income and expense items are translated at the weighted-average exchange rate prevailing during the period. The effects of foreign currency translation adjustments for these subsidiaries are deferred and reported in stockholders’ equity as a component of Accumulated Other Comprehensive Loss. The effects of foreign currency transactions denominated in a currency other than an entity's functional currency are included in Gain on foreign currency exchange in the Consolidated Statements of Operations. The Company does not hedge foreign currency translation risk in the net assets and income it reports from these sources.

Revenue Recognition

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Product sales consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes product revenue when the following events have occurred: (a) the Company has transferred physical possession of the products, (b) the Company has a present right to

payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products.

For the Company’s Lap-Band product, these criteria are met under the agreements with most customers upon product shipment. This includes sales to distributors, who sell the products to their customers, take title to the products and assume all risks of ownership at the time of shipment. Distributors are obligated to pay within specified terms regardless of when, if ever, they sell the products. Refer to Note 13 for additional information about the Company’s products and contractual arrangements.

Taxes collected from customers and remitted to governmental authorities are accounted for on a net basis. Accordingly, such amounts are excluded from revenues. Amounts billed to customers related to shipping and handling are included in revenues. Shipping and handling costs related to revenue producing activities are included in cost of sales.

Variable Consideration

The Company records revenue from customers in an amount that reflects the transaction price it expects to be entitled to after transferring control of the goods. Customers and distributors of the Lap-Band product generally have the right to return or exchange products purchased for up to thirty days from the date of product shipment contingent upon a 10% restocking fee. Any such return or exchange of Lap-Band products will be recorded as a reduction of revenue in the period incurred.

Certain Lap-Band customers may receive volume rebates or discounts. Discounts are treated as a reduction in sales price and therefore corresponding revenue at the point of sale. Any volume rebates offered would be estimated and reserved as a reduction in revenue.

Warranty

The Company generally provides warranties against defects in materials and workmanship, and provides replacements at no charge to the customer, as long as the customer has notified the Company within 30 days of delivery and returns such products in accordance with the Company’s instructions. As they are considered assurance-type warranties, the Company does not account for them as separate performance obligations. Warranty reserve requirements are based on a specific assessment of the products sold with warranties where a customer asserts a claim for warranty or a product defect.

For the vBloc product line, the Company has a 5-year warranty on all implantable parts. vBloc sales began in 2015 and ended in 2018, so this warranty period will go through 2023.

Contract Balances

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied.

Practical Expedients

The Company has elected the practical expedient not to determine whether contracts with customers contain significant financing components for contracts with a duration of one year or less.

Advertising Cost

Advertising costs are expensed as incurred and totaled $3.0 million and $0.5 million for the years ended December 31, 2021 and 2020, respectively.

Research and Development Expenses

Research and development expenses consist of costs incurred to further the Company’s research and development activities, including product development, clinical trial expenses, quality assurance, regulatory expenses, payroll and

other personnel expenses, materials and consulting costs. Certain of these activities, such as pre-clinical studies and clinical trials, may be conducted by third-party service providers at the direction of the Company.

The Company records the estimated costs of research and development activities performed by third-party service providers based upon the estimated services provided but not yet invoiced and includes these costs in accrued expenses and other payables in the Consolidated Balance Sheets and within research and development expense in the Consolidated Statements of Operations. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers. As actual costs become known, the Company adjusts its accrued liabilities.

Stock-Based Compensation

The Company applies ASC 718 Compensation — Stock Compensation and accordingly records compensation expense for stock options over the vesting or service period using the fair value on the date of grant, as calculated by the Company using the Black-Scholes model. The Company’s stock-based compensation plans are more fully described in Note 13.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period, including the pre-funded warrants, see Note 11, that were reclassified from warrant liability to equity as a result of the reverse stock split. Diluted net loss per share is based on the weighted-average common shares outstanding during the period plus dilutive potential common shares calculated using the treasury stock method. Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share. For purposes of basic and diluted per share computations, loss from continuing operations and net loss are reduced by the down round adjustments for convertible preferred stock and warrants.

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:


	December 31,
	2021	2020
Stock options	885,039	40
Unvested restricted stock units	1,711,318	—
Convertible preferred stock	38	1,288
Warrants	6,952,385	13,483,446

Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash and trade accounts receivable. Cash and cash equivalents are primarily deposited in demand and money market accounts. At times, such deposits may be in excess of insured limits. Investments in money market funds are not considered to be bank deposits and are not insured or guaranteed by the federal deposit insurance company or other government agency. These money market funds seek to preserve the value of the investment at $1.00 per share; however, it is possible to lose money investing in these funds. The Company has not experienced any losses on its deposits of cash and cash equivalents. To minimize the risk associated with trade accounts receivable, management maintains relationships with the Company’s customers that allow management to monitor current changes in business operations so the Company can respond as needed.

Substantially all of the Company’s revenue is denominated in U.S. dollars. Only a small portion of revenue and expenses are denominated in foreign currencies, principally the Australian dollar and Euro for 2021 and 2020. The Company has not entered into any hedging contracts. Future fluctuations in the value of the U.S. dollar may affect the price competitiveness of the Company’s products outside the U.S.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an “exit price”). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including consideration of non-performance risk.

Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value.

Level 1 inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 inputs are observable, either directly or indirectly.

Level 3 inputs are unobservable due to little or no corroborating market data.

The carrying amounts of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and certain accrued and other liabilities approximate fair value due to their short-term maturities. Refer to Note 7 regarding the impairment of goodwill and IPR&D, Note 8 regarding the fair value of debt instruments and Note 12 regarding fair value measurements and inputs of warrants.

Recent Accounting Pronouncements

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

In May 2021, the FASB issued Accounting Standards Update (“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. This update additionally 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 adopted this guidance early and the adoption did not have a material impact on the Company’s consolidated financial statements.

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 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 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.

Various other accounting standards and interpretations have been issued with 2021 effective dates and effective dates subsequent to December 31, 2020. The Company has evaluated the recently issued accounting pronouncements that are currently effective or will be effective in 2021 and believe that none of them have had or will have a material effect on the Company’s financial position, results of operations or cash flows.

Liquidity and Management's Plans

12 Months Ended

Dec. 31, 2021

Liquidity and Management's Plans

Liquidity and Management's Plans

(3)

Liquidity and Management’s Plans

As of December 31, 2021, the Company had net working capital of approximately $22.9 million, primarily due to cash and cash equivalents and restricted cash of $22.8 million, and $2.8 million of accounts receivable.

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 marketplace reshapecare 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 expand our portfolio and offer future minimally invasive treatments and therapies in the obesity continuum of care, which includes the Obalon Balloon System acquired from the recently finalized merger with Obalon that was completed on June 15, 2021. With the July 2021 financing transaction the Company believes that it has the flexibility to manage the growth of its expenditures and operations.

Liquidity

The Company has incurred significant net losses and negative cash flows from operations since inception, and as a result has an accumulated deficit of approximately $576.8 million. The Company also expects to incur a net loss and negative cash flows from operations for 2022.

The Company expects operating losses and negative cash flows from operations to continue for the foreseeable future. The Company believes its current capital resources will be sufficient for the Company to continue as a going concern for at least one year from the issuance date of these consolidated financial statements.

The Company will be required to raise additional capital, however, there can be no assurance as to whether additional financing will be available on terms acceptable to the Company, if at all. If sufficient funds on acceptable terms are not available when needed, it would have a negative impact on the Company’s financial condition and could force the Company to delay, limit, reduce, or terminate product development or future commercialization efforts or grant rights to develop and market product candidates or testing products that the Company would otherwise plan to develop.

COVID-19 Risk and Uncertainties and CARES Act

Since the first quarter of 2020, the COVID-19 pandemic has led to unprecedented restrictions on, distributions in, and other related impacts on business and personal activities, including a shift in healthcare priorities, which resulted in a significant decline in medical procedures in 2020 in the United States and internationally. Concerns remain regarding the pace of economic recovery due to virus resurgence across the globe from the Delta and Omicron variants and other virus mutations as well as vaccine distribution and hesitancy. As the COVID-19 pandemic shifts to a COVID-19 endemic, the United States and other foreign governments may continue existing measures or implement new restrictions and other requirements in light of the continuing spread of the COVID-19 virus. Due to the uncertainty caused by the COVID-19, the full extent to which COVID-19 will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, manufacturing, clinical trials, research and development costs, reserves and allowances, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak (including new and more contagious variance of COVID-19), its severity, the actions to contain the virus or address its impact, the timing, distribution, public acceptance and efficacy of vaccines and other treatments, United States and foreign governments

actions to respond to the reduction of global activity, and how quickly and to what extent normal economic and operating conditions can resume.

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. On February 3, 2021, the Company submitted the application for PPP loan forgiveness according to the terms and conditions of the United States Small Business Administration’s (“SBA”) 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. This may still be subject to audit by the SBA or relevant authorities, subject to terms and conditions of the PPP program. The Company was also able to benefit from the employee recognition credit. For further details on the PPP loan and the employee recognition credit, see Note 8 below.

Supplemental Balance Sheet Information

12 Months Ended

Dec. 31, 2021

Supplemental Balance Sheet Information

Supplemental Balance Sheet Information

(4)

Supplemental Balance Sheet Information

Inventory


	December 31,		December 31,
	2021		2020
Raw materials	$	829	$	174
Sub-assemblies		682		733
Finished goods		1,492		1,337
Total inventory	$	3,003	$	2,244

At December 31, 2021, $0.6 million of raw materials relates to inventory acquired from Obalon, in connection with the merger.

Prepaid expenses and other current assets:


	December 31,		December 31,
	2021		2020
Prepaid insurance	$	736	$	619
Prepaid advertising and marketing		698		—
Prepaid contract research organization expenses		—		295
Other current assets		188		159
Total prepaid expenses and other current assets	$	1,622	$	1,073

Accrued and other liabilities:


	December 31,		December 31,
	2021		2020
Payroll and benefits	$	1,527	$	1,735
Customer deposits		549		398
Taxes		307		265
Accrued insurance premium		301		272
Accrued professional		300		446
Other liabilities		185		514
Total accrued and other liabilities	$	3,169	$	3,630

Property and Equipment

12 Months Ended

Dec. 31, 2021

Property and Equipment

Property and Equipment

(5)

Property and Equipment

Property and equipment consist of the following:


	December 31,
	2021		2020
Machinery and equipment	$	955	$	179
Furniture and equipment		38		83
Computer hardware and software		135		78
Tooling and molds		236		—
Leasehold improvements		23		19
Construction in progress		407		404
		1,794		763
Less accumulated depreciation and amortization		(340)		(179)
Property and equipment, net	$	1,454	$	584

Depreciation expense for the years ended December 31, 2021 and 2020, was approximately $232 thousand and $15 thousand, respectively.

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets

Goodwill and Intangible Assets

(6)

Goodwill and Intangible Assets

In connection with the merger with Obalon, ReShape recorded $2.7 million of intangible assets related to developed technology, with an expected life of 15 years and that will be amortized on a straight-line basis. The consolidated intangible assets consist of the following:


	December 31, 2021
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Finite-lived intangible assets:
Developed technology	10.8	$	17,092	$	(4,467)	$	12,625
Trademarks/Tradenames	10.0		2,045		(790)		1,255
Covenant not to compete	3.0		76		(76)		0
			19,213		(5,333)		13,880
Indefinite-lived intangible assets:
In-process research and development	indefinite		6,947		—		6,947
Total		$	26,160	$	(5,333)	$	20,827


	December 31, 2020
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Finite-lived intangible assets:
Developed technology	10.0	$	14,362	$	(2,933)	$	11,429
Trademarks/Tradenames	10.0		2,045		(585)		1,460
Covenant not to compete	3.0		76		(76)		0
			16,483		(3,594)		12,889
Indefinite-lived intangible assets:
In-process research and development	indefinite		14,133		—		14,133
Total		$	30,616	$	(3,594)	$	27,022

The gross amount and accumulated impairment loss of indefinite-lived intangible assets are as follows (in thousands):


	December 31,
	2021		2020
Gross amount	$	20,721	$	20,721
Accumulated impairment loss		(13,774)		(6,588)
Indefinite-lived intangible assets, net	$	6,947	$	14,133

Amortization expense for both the years ended December 31, 2021 and 2020, was approximately $1.7 million.

Estimated amortization expense for each of the years ending December 31 is as follows:


Year ending December 31,
2022	$	1,823
2023		1,823
2024		1,823
2025		1,823
2026		1,823
Thereafter		4,765
	$	13,880

In connection with the merger with Obalon, ReShape recorded 21.6 million of goodwill, for further details see Note 10. The changes in the carrying amount of goodwill were as follows:


Goodwill at December 31, 2020	$	—
Goodwill acquired during the year		21,623
Adjustments to purchase price allocation		(57)
Impairment of goodwill		(21,566)
Goodwill at December 31, 2021	$	—

The primary decrease to goodwill was a $21.6 million impairment, for further details see Note 7 below. Additionally, there were $0.1 million of adjustments to goodwill resulting from a decrease to goodwill of $0.5 million related to adjustments of pre-existing warrants that were treated as a liability, $0.4 million in goodwill due to adjustments to inventory, as the Company has continued to examine and evaluate the inventory obtained from the merger.

Impairment of Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2021

Impairment of Intangible Assets and Goodwill

Impairment of Intangible Assets and Goodwill

(7)

Impairment of Intangible Assets and Goodwill

As of December 31, 2021, the Company determined a triggering event occurred due to the decline in the Company’s market capitalization, coupled with the delayed effects of the COVID-19 pandemic, and as such, the Company performed a qualatative analysis of IPR&D. Due to continued delays in the clinical trials experienced during the COVID-19 restrictions, the Company revised its expectations of when revenues would commence for the ReShape Vest, thus reducing the near-term future net cash flows related to the ReShape Vest. As a result, the Company performed a quantitative impairment analysis and recorded a one-time nonrecurring impairment charge of $7.2 million, for the excess of the carrying value over the estimated fair value. The fair value of the IPR&D was estimated using an income approach using Level 3 assumptions which included discounting the revised projected future net cash flows to their present value, with a discount rate of 21.7%. The Company also assessed the recoverability of the finite-lived intangible assets and did not identify any impairment as a result of this analysis.

As of December 31, 2021, the Company determined due to a decrease in market capitalization, that it is more likely than not that the fair value of net assets are below their carrying amounts and, therefore, the Company performed a goodwill impairment test. The Company estimated the fair value of the goodwill using a combination of the income and market approach, and then the carrying amount including the goodwill to the fair value. Since the fair value was less than the carrying amount, we calculated the goodwill impairment as the difference between the fair value and carrying

value. As the difference was greater than the carrying amount of the goodwill the Company impaired the entire balance of $21.6 million.

During the second quarter of 2020, the Company determined a triggering event occurred due to the COVID-19 pandemic, and as such, the Company performed a quantitative analysis and determined the fair value of the IPR&D exceeded the carrying value and concluded there was no impairment of intangible assets. No IPR&D impairment was recognized for the year ended December 31, 2020.

Debt

12 Months Ended

Dec. 31, 2021

Debt

Debt

(8)

Debt


	December 31,		December 31,
	2021		2020
Asset purchase consideration	$	—	$	2,867
Credit agreement		—		9,500
PPP loan		—		955
Total debt		—		13,322
Less: unamortized debt discount		—		545
Less: current portion of debt		—		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. Under the terms of PPP, all or certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

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, the PPP Loan has been forgiven in full including all interest incurred.

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 $0.5 million employee recognition credit during the year ended December 31, 2021.

Credit Agreement

On March 25, 2020, the Company executed a credit agreement up to $3.5 million, with an investor (the “Lender”), who holds warrants in connection with the June 2019 and September 2019 private placement transactions. See Note 8 for additional details. 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 value of the original Series G warrants were recorded as part of the debt issuance costs. See Note 12 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, 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. 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 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 December 31, 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 December 31, 2021, the Company had paid off the purchase consideration in full.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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+ Details

Leases

12 Months Ended

Dec. 31, 2021

Leases

Leases

(9)

Leases

The Company had noncancelable operating leases for office and warehouse space in San Clemente and Carlsbad, California, as well as 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.

The Company determines the lease term as the noncancelable period of the lease, and may include options to extend or terminated the lease when reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the balance sheet. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments. Right-of-use assets also include any lease payments made at or before lease commencement and any initial direct costs incurred, and exclude any lease incentives received.

Operating lease costs for the years ended December 31, 2021 and 2020, were $0.6 and $0.3 million, respectivley. Variable lease costs were not material.

Supplemental information related to operating leases is as follows:


Balance sheet information at December 31, 2021
Operating lease ROU assets	$	266

Operating lease liabilities, current portion	$	279
Operating lease liabilities, long-term portion		-
Total operating lease liabilities	$	279

Cash flow information for the nine months ended September 30, 2021
Cash paid for amounts included in the measurement of operating leases liabilities	$	565

Maturities of operating lease liabilities at December 31, 2021 were as follows:


Twelve months ending December 31, 2021
2022	$	283
Total lease payments		283
Less: imputed interest		4
Total lease liabilities	$	279

Weighted-average remaining lease term at end of period (in years)		0.4
Weighted-average discount rate at end of period		5.1

Acquisition

12 Months Ended

Dec. 31, 2021

Acquisition

Acquisition

(10)

Acquisition

On June 15, 2021, the Company completed the 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 year ended December 31, 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	$	5,887
Property and equipment, net		796
Right-of-use assets		335
Other assets		1,898
Goodwill		21,566
Developed technology		2,730
Liabilities assumed		(2,650)
Total purchase price		30,562
Less: cash acquired		(5,207)
Total purchase price, net of cash acquired	$	25,355

As part of the merger, the Company assumed warrants agreements previously entered into by Obalon that contained a fundamental transaction provision that provide the holders a cash payment based on a Black-Scholes valuation of the warrants. This clause was valid for 30 days subsequent to the date of the transaction. The merger was considered a fundamental transaction provision that allowed the holder to redeem the warrants for cash. The Company performed a preliminary valuation of these warrants and recorded a liability at the time of the merger of $2.0 million. The Company completed its valuation of these warrants which resulted in a liability for the warrants of $1.3 million, the decrease of $0.7 million, to the liability had a corresponding decrease to goodwill. The Company had one of the holders exercise the fundamental transaction option, and rather than paying cash both parties agreed on the Company issuing shares of common stock and new warrants to this investor. See Notes 11 and 12 below for additional details. As the 30 day period passed, the Company valued the remaining warrants using a Black-Scholes model with an exercise price ranging from $13.20 to $15.00 per share, a risk free rate of 0.44%, a volatility rate of 122.1% and a dividend rate of 0. This resulted in a total fair value of $0.9 million as of July 15, 2021, with the change in fair value being recognized as a component of warrant expense. The ending liability of $0.5 million was reclassified from a current liability to APIC.

As of the year ended December 31, 2021, the Company is still finalizing the impact of acquisition accounting on deferred income taxes.

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%. For the year ended December 31, 2021, the Company impaired the goodwill due to the decline in market capitalization, for further details see Note 7.

Obalon’s results of operations have been included in our financial statements for the periods subsequent to the consummation of the Merger on June 15, 2021. Obalon contributed no revenue and a net loss of $2.0 million, in addition to the $21.6 million of loss on impairment of goodwill, for the period from June 16, 2021 through December 31, 2021.

Pro Forma Results of Operation (Unaudited)

The following table summarizes the results of operations of the above mentioned acquisition from their respective dates of acquisition included in our consolidated results of operations and the unaudited pro forma results of operations of the combined entity had the date of acquisition been January 1, 2020:


	Revenue		Net Loss
	(Unaudited)		(Unaudited)
Combined entity: Supplemental pro forma from January 1, 2021 to December 31, 2021	$	13,432	$	(69,452)
Combined entity: Supplemental pro forma from January 1, 2020 to December 31, 2020		12,887		(33,965)

The information present above is for illustrative purpose only and is not necessarily indicative or results that would have been achieved if the acquisitions had occurred as of the beginning of our 2020 reporting period.

Equity

12 Months Ended

Dec. 31, 2021

Equity

Equity

(11)

Equity

The Company may issue preferred stock, common stock, or both, in connection with underwritten public offerings, registered direct offerings, private placements or business acquisitions. Such issuances of equity typically include the issuance or sale of warrants to purchase common stock. Certain issuances of convertible preferred stock and warrants may contain anti-dilutive features apart from customary adjustments for splits and reverse splits of common stock (collectively, “down round features”). When a series of convertible preferred stock contains this non-standard down round feature, the Company is required to adjust the conversion price in the event of future stock sales at a lower unit price. When warrants issued in connection with an equity transaction contain, or are amended to contain, this non-standard down round feature, the Company is required to adjust the exercise price upon the issuance of any shares of common stock or securities convertible into shares of common stock below the then-existing exercise price and evaluate and account for the value attributable to the reduced warrant exercise price. In the event down round adjustments are triggered, the values attributable to the adjustment to the convertible preferred stock conversion price and warrant exercise price are recorded as an increase to additional paid-in capital and increase to accumulated deficit.

All series of the Company’s convertible preferred stock are classified in stockholders’ equity, including those with the down round feature, when applicable to the equity transaction.

Warrants to purchase common stock are classified in stockholders’ equity, including those issued with the down round feature, as they are both indexed to the Company’s own stock and meet the scope exception in ASC 815 “Derivatives and Hedging.”

The Company had the following equity transactions during the years ended December 31, 2021 and 2020:

August 2021 Issuance of Common Stock for Services

On August 11, 2021, the Company entered into a consulting agreement in which the Company issued to the consultant 37,500 shares of restricted common stock for the consulting services in a private placement in reliance on Rule 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”). The shares were deemed earned on the day of the agreement and will become unrestricted six months after the agreement date which is when the contract term ends. The value of the securitites were included as a component of prepaid expenses and is amortized over the contract term.

July 2021 Exchange of Warrants for Common Stock

On July 16, 2021, the Company entered into an exchange agreement (the “Exchange Agreement”) with existing 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 of Obalon Therapeutics, Inc. and ReShape Lifesciences Inc. 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, 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 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 of $4.038 with a term of five years. For further details on the warrants see Note 12 below.

June 2021 Exercises of Warrants for Common Stock

On June 28, 2021, the Company entered into a warrant exercise agreement with existing 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. 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 prior to the execution of the warrant exercise agreement. For further details on the warrants see Note 12 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 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 8 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 200,000 shares of common stock to investors, and on June 21, 2021, the Company issued 187,674 shares of common stock to investors, 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.

Common Stock Issued Related to Stock Awards and Options

Restricted Stock Units

On July 22, 2021, the Company issued restricted stock units (“RSUs”) to certain members of the management and Board of Directors. During the year ended December 31, 2021, the Company issued 1,899,254 shares of common stock subject to the vesting of the awards. For further details see Note 14.

Exercise of Stock Options

On September 15, 2021, the Company issued 72,666 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.

On July 13, 2021, the Company issued 18,166 shares of common stock related to exercises of previous Obalon employees exercising stock option awards. The Company received $42 thousand related to this exercise.

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 580,000 shares of common stock to investors, 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 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 of the minimum life of the agreement.

April 2020 Exercise of Warrants for Common Stock

As discussed in Note 8 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.

Series C Convertible Preferred Stock

The Series C convertible stock has a liquidation preference of $274.88 per share. Holders of the Series C convertible preferred stock have the right to convert their shares into shares of common stock instead of receiving the liquidation preference. The Series C convertible preferred stock is entitled to dividends on an as-if-converted-to-common stock basis if such dividends are paid on shares of common stock. In general, the holders of the Series C convertible preferred stock do not have voting rights.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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-Paragraph 13
-Subparagraph (i)
-URI http://asc.fasb.org/extlink&oid=123467817&loc=SL123496158-112644

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Warrants

12 Months Ended

Dec. 31, 2021

Warrants.

Warrants

(12)

Warrants

The Company’s grants of warrants to purchase common stock are primarily in connection with equity and debt financings. See Note 11 for additional information about equity financings and the related issuance of warrants. Warrant activity was as follows:





	Shares
Balance December 31, 2019	7,671,934
Issued	3,607,680	⁽¹⁾
Exercised	(3,227,079)	⁽²⁾
Cancelled	(1)
Balance December 31, 2020	8,052,534
Obtained due to merger	875,249	⁽³⁾
Issued	6,910,739	⁽⁴⁾
Exercised	(8,886,137)	⁽⁵⁾
Cancelled	—
Balance December 31, 2021	6,952,385

(1)	Warrants issued in 2020 includes 3,607,680 of three issuances of Series G warrants.

(2)	Warrants exercised in 2020 includes 1,741,502 of Series C pre-funded warrants at an exercise price of $0.21 per share, 1,452,329 Series F pre-funded warrants at an exercise price of $0.21 per share and 33,248 of placement agent warrants.

(3)	Obalon’s warrants outstanding at the time of the merger with the 1-for-3 reverse stock split adjustment. In addition, this amount includes 504,861 warrants converted into common shares in July of 2021, see Note 11 for further details.

(4)	Warrants issued in 2021 includes 563,700 of Series G warrants and 6,347,039 of warrants issued to various institutional investors.

(5)

Warrants exercised in 2021 includes 1,879,002 Series A warrants at an exercise price of $4.68 per share, 64,218 Series C pre-funded warrants at an exercise price of $0.21 per share, 1,879,002 Series E warrants at an exercise price of $6.00 per share, 387,674 Series F pre-funded warrants at an exercise price of $0.21 per share, and 4,171,380 Series G warrants with exercise prices ranging from $5.77 per share to $6.00 per share, and an exchange of 504,861 warrants for common stock.

Warrant Assumptions – 2021 Warrants Issued

The following table provides the assumptions used to calculate the fair value of the new warrants issued during 2021, using a Black-Scholes model:


	Warrants Outstanding		Strike Price	Volatility		Remaining Life	Risk Free Rate
January 19, 2021	563,700	$	6.21	97.1	%	5.0	0.45	%
June 28, 2021	5,947,039	$	6.00	97.6	%	5.0	0.90	%
July 16, 2021	400,000	$	4.04	157.7	%	5.0	0.79	%

Warrant Assumptions – 2020 Warrants Issued

The following table provides the assumptions used to calculate the fair value of the Series G warrants issued during 2020, using a Black-Scholes model:


	Warrants Outstanding		Strike Price	Volatility		Remaining Life	Risk Free Rate
First Issuance	1,200,000	$	3.70	97.0	%	5.0	0.56	%
Second Issuance	1,200,000	$	3.25	101.1	%	5.0	0.27	%
Third Issuance	4,000,000	$	3.50	100.8	%	5.0	0.37	%

Revenue Disaggregation and Operating Segments

12 Months Ended

Dec. 31, 2021

Revenue Disaggregation and Operating Segments

Revenue Disaggregation and Operating Segments

(13)

Revenue Disaggregation and Operating Segments

The following table presents the Company’s revenue disaggregated by product and geography:


	Year Ended
	December 31,
	2021		2020
United States	$	10,297	$	8,275
Australia		1,039		1,086
Europe		2,127		1,824
Rest of world		137		114
Total revenue	$	13,600	$	11,299

Operating Segments

The Company conducts operations worldwide and is managed in the following geographical regions: United States, Australia, Europe and 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 years ended December 31, 2021 and 2020. During the second half of 2020 the Company launched reshapecare, which had minimal revenue for the years ended December 31, 2021 and 2020. The Company anticipates generating more reshapecare revenue during 2022. There was no revenue or gross profit recorded for the ReShape Vest or Diabetes Bloc-Stim Neuromodulation in 2021 or 2020 because these two products are still in the development stage. During June 2021, the Company merged with Obalon, which had no revenues between the merger and December 31, 2021.

The Company’s geographic segments are reported based on the financial information provided to the Chief Operating Decision Maker (the Chief Executive Officer, or “CODM”). The Company’s CODM evaluates segment performance based on revenue and gross profit. The Company’s CODM does not use operating segment assets information to allocate resources or to assess performance of the operating segments and thus total segment assets have not been disclosed.

- 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
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
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-Paragraph 13
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-Topic 606
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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=123351226&loc=SL49130554-203045

+ Details

Stock-based Compensation

12 Months Ended

Dec. 31, 2021

Stock-based Compensation

Stock-based Compensation

(14)

Stock-based Compensation

The ReShape Lifesciences Inc. Second Amended and Restated 2003 Stock Incentive Plan (the “Plan”) provides for the grant of stock options or other stock-based awards to employees, officers, non-employee directors and outside consultants of the Company. In 2018, the Company’s stockholders approved an amendment to the Plan that increased the number of shares authorized for issuance by 26 shares. The Plan amendment in 2018 also added an automatic share increase provision that provides for an annual increase on January 1 of each year beginning in 2019 such that the number of shares of common stock authorized for issuance under the Plan is equal to 15% of the total shares of common stock outstanding, on an as converted basis, as of the last day of the immediately preceding fiscal year. The increased number of shares available for issuance under the Plan is subject to adjustment in accordance with certain provisions of the Plan. As of January 1, 2021, the number of shares authorized for issuance increased from 3,067,949 to 4,107,096 and there were 1,510,739 shares of common stock available for issuance under the Plan.

The Plan is administered by the board of directors, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. Options granted under the Plan expire no later than ten years from the date of grant. The exercise price of each option may not be less than 100% of the fair market value of the common stock at the date of grant, except if an incentive stock option is granted to a Plan participant possessing more than 10% of the Company’s common stock, as defined by the Plan, the exercise price may not be less than 110% of the fair value of the common stock at the date of grant. Employee stock options generally vest over four years.

Stock Options

On August 18, 2021, the Company granted 790,669 stock options to certain employees. The options vest at 25% on the first anniversary date of the employee retroactively, resulting in a one-time charge of approximately $1.6 million, and the remaining 75% of the option shares vest in as nearly equal amounts as possible on the last day of each of the next 36 months thereafter. There were no stock options granted during the year ended December 31, 2020.

A summary of the status of the Company’s stock options are as follows:


				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
		Exercise Price		Contractual	Value
	Shares	Per Share		Life (years)	(in thousands)
Outstanding at December 31, 2019	39	$	2,130,682.62
Options granted	—		—
Options exercised	—		—
Options cancelled	—		—
Outstanding at December 31, 2020	39		2,130,682.62		$	—
Vested options obtained due to merger	366,410		35.88
Options granted	790,669		3.62
Options exercised	(182,696)		2.28
Options cancelled	(89,383)		1,025.23
Outstanding at December 31, 2021	885,039		8.85	8.9	$	—
Exercisable at December 31, 2021	600,057		7.97	8.6		—
Vested and expected to vest at December 31, 2021	885,039		10.03	8.9		—

As of December 31, 2021, stock options under the Plan that were outstanding, exercisable and vested, and expected to vest, had no intrinsic value. The unrecognized share-based expense at December 31, 2021 was $0.9 million and will be recognized over a weighted average period of 2.4 years.

Stock option awards outstanding under the Company’s incentive plans have been granted at exercise prices that are equal to the market value of its common stock on the date of grant. Such options generally vest over a period of four years and expire at ten years after the grant date. The Company recognizes compensation expense ratably over the vesting period. The Company uses a Black-Scholes option-pricing model to estimate the fair value of stock options granted, which requires the input of both subjective and objective assumptions as follows:

Expected Term – The estimate of expected term is based on the historical exercise behavior of grantees, as well as the contractual life of the options granted.

Expected Volatility – The expected volatility factor is based on the volatility of the Company’s common stock for a period equal to the term of the stock options.

Risk-free Interest Rate – The risk-free interest rate is determined using the implied yield for a traded zero-coupon U.S. Treasury bond with a term equal to the expected term of the stock options.

Expected Dividend Yield – The expected dividend yield is based on the Company’s historical practice of paying dividends on its common stock.

The Company’s weighted average assumptions used to estimate fair value of stock options granted during the year ended December 31, 2021 were as follows:


Risk-free interest rate		0.01%
Expected term (in years)		10
Expected dividend yield		0.00%
Expected volatility		157.10%

The Company issued no stock options during the year ended December 31, 2020.

Restricted Stock Units

On July 22, 2021, the Company issued two RSU awards each to certain members of management and the Board of Directors totaling 3,610,572 RSU awards. The awards given to the members of management consist of one award which vests at 25% on the first anniversary date of the employee retroactively, resulting in a one-time charge of approximately $7.3 million, and the remaining 75% of the shares vest in as nearly equal amounts as possible on the last day of each of the next 36 months thereafter. The other award vests in as nearly equal amounts as possible on the last day of each of the next 36 months after the date of grant. Both awards given to the Board of Directors vest 50% on the date granted and the remaining 50% on January 1, 2022.

A summary of the Company’s unvested RSUs award activity for the year ended December 31, 2021, were as follows:


		Weighted
		Average
		Grant Date
	Shares	Fair Value
Unvested RSUs at December 31, 2020	—	$	—
Granted	3,610,572		4.36
Vested ⁽¹⁾	(1,899,254)		4.36
Cancelled/Forfeited	—		—
Non-vested RSUs at December 31, 2021	1,711,318		4.36

(1)

At December 31, 2021, there were 47,848 shares of common stock related to RSU awards that have vested and the shares were not released to the participants until January of 2022. The Company recorded a liability to account for these shares and reversed the liability once the shares were issued to the participants.

The fair value of each RSU is the closing price on the Nasdaq of the Company’s common stock on the date of grant. Upon vesting, a portion of the RSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining RSUs will be settled in shares of the Company’s common stock after the vesting period. The unrecognized compensation cost related to RSUs at December 31, 2021 was $4.6 million and is expected to be recognized over a period of 2.0 years.

Compensation expense related to stock options was recognized as follows:


	Year Ended
	December 31,
	2021		2020
Sales and marketing	$	1,221	$	—
General and administrative		10,226		1,323
Research and development		1,305		—
Total stock-based compensation expense	$	12,752	$	1,323

Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

(15)

Income Taxes

Income tax expense (benefit) consists of the following:


	Year ended December 31,
	2021		2020
Deferred:
Federal	$	(69)	$	(84)
State		9		(2)
Deferred income tax benefit		(60)		(86)
Current:
Federal		—		—
State		11		1
Foreign		(57)		(96)
Total income tax benefit, net	$	(106)	$	(181)

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:


	Year ended December 31,
	2021			2020
Income tax benefit at U.S. federal statutory rate		21.0	%		21.0	%
State income tax benefit, net of federal benefit		3.3	%		4.2	%
Stock warrant valuation		(2.2)	%		(10.2)	%
Goodwill impairment		(7.7)	%		—	%
Stock-based compensation		(13.0)	%		—	%
Other permanent differences		(4.3)	%		(0.6)	%
Change in state tax rate		(0.8)	%		(0.3)	%
Foreign rate differential		—	%		0.5	%
Net operating loss true up		0.3	%		—	%
Other adjustments		2.3	%		1.4	%
Change in valuation allowance		1.4	%		(15.2)	%
Effective income tax rate		0.3	%		0.8	%

The components of deferred tax assets and liabilities are as follows:


	December 31,
	2021		2020
Deferred tax assets:
Start-up costs	$	1,225	$	1,192
Capitalized research and development costs		408		503
Reserves and accruals		1,679		9,235
Property and equipment		178		133
Research and development credit		3,323		1,194
Lease liability		74		41
Net operating loss carryforwards		54,653		30,156
State and local taxes		2		2
Total gross deferred tax assets		61,542		42,456
Valuation allowance		(61,380)		(39,803)
Deferred tax assets, net of valuation allowance		162		2,653
Intangible assets		(647)		(3,151)
Operating lease right-of-use assets		(70)		(117)
Total gross deferred tax liabilities		(717)		(3,268)
Net deferred tax liability	$	(555)	$	(615)

In assessing the realization of deferred tax assets, management 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 December 31, 2021 and 2020. The remaining net deferred tax liability at both December 31, 2021 and 2020 is the result of the deferred tax liability associated with the indefinite-lived intangible asset less the deferred tax asset associated with U.S. federal net operating loss that do not expire. The Company has a policy that NOL’s are shown gross with valuation allowances with respect to IRC 382 limitations.

As of December 31, 2021 and 2020, the Company had U.S. federal net operating loss carryforwards of $178.2 million and $77.2 million, respectively. Of the total U.S. federal net operating loss carryforwards at December 31, 2021, $1.2 million is subject to a 20 year carryover period and began expiring in 2021. Losses generated beginning in 2018 will carryover indefinitely. The Company had state net operating loss carryforwards of $280.9 million and $222.4 million at December 31, 2021 and 2020, respectively and had foreign net operating loss carryforwards of $0.2 million and $0.3 million at December 31, 2021 and 2020, respectively. Net operating loss carryforwards of the Company are subject to review and possible adjustment by the taxing authorities. With certain exceptions (e.g. the net operating loss carryforwards), the Company is no longer subject to U.S. federal, state or local examinations by tax authorities for years prior to 2016. There are no tax examinations currently in progress.

The Company’s ability to utilize its net operating loss carryforwards, tax credits, and built-in items of deduction, including capitalized start-up costs and research and development costs, has been, and may continue to be substantially limited due to ownership changes. These ownership changes limit the amount of net operating loss carryforwards, credits and built-in items of deduction that can be utilized annually to offset future taxable income. In general, an ownership change, as defined in IRC Section 382, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50% of the outstanding stock of a company by certain stockholders or public groups. In 2021, the Company completed an IRC Section 382 review and determined that ownership changes had occurred, which resulted in the determination that $82.5 million and $91.0 million of U.S. federal and state net operating losses, respectively would expire unused. Additionally, it was determined that $3.4 million of U.S. federal research and development credits would also expire unused. Due to the valuation allowance against deferred tax assets at December 31, 2021, the net effect of this, and any further, limitation will have no impact on results of operations.

The Company has adopted accounting standards which prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company had no amounts of unrecognized tax benefits that, if recognized, would affect its effective income tax rate for the years ended December 31, 2021 and 2020. The Company’s policy is to classify interest and penalties related to income tax expense as tax expense. As of December 31, 2021, the Company had no amount accrued for the payment of interest and penalties related to unrecognized tax benefits.

- 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

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Subparagraph (SX 210.4-08(h)(2))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies

Commitments and Contingencies

(16)

Commitments and Contingencies

Employee Arrangements and Other Compensation

Certain members of management are entitled to severance benefits payable upon termination following a change in control, which would approximate $1.8 million at December 31, 2021. The Company also has agreements with certain employees to pay bonuses based on targeted performance criteria. As of December 31, 2021 and 2020, approximately $0.9 million and $1.3 million, respectively, was accrued for performance bonuses, which is included in accrued liabilities in the consolidated balance sheets.

Purchase Commitments

The Company generally purchases its products and accessories from a limited group of third-party suppliers through purchase orders. The Company had $4.1 million of purchase commitments as of December 31, 2021, for which the Company has not received the goods or services and which are expected to be purchased primarily within one year. These purchase commitments were made to secure better pricing and to ensure the Company will have the necessary inventory to meet anticipated near term demand. Although open purchase orders are considered enforceable and legally binding, the Company may be able to cancel, reschedule, or adjust requirements prior to supplier fulfillment.

Litigation

On August 6, 2021, Cowen and Company, LLC filed a complaint against ReShape, as successor in interest to Obalon Therapeutics, in the Supreme Court of the State of New York based on an alleged breach of contract arising out of Cowen’s prior engagement as Obalon’s financial advisor. The complaint alleges that Cowen is entitled to be paid a $1.35 million fee in connection with ReShape’s merger with Obalon under the terms of Cowen’s engagement agreement with Obalon. The complaint also seeks reimbursement of Cowen’s attorneys’ fees and interest in connection with its claim. The Company is unable to predict the ultimate outcome of this matter; therefore, no amounts have been accrued. The Company intends to vigorously defend this matter.

On August 18, 2021, H.C. Wainwright & Co., LLC filed a complaint against ReShape in the Supreme Court of the State of New York based on an alleged breach of contract arising out of Wainwright’s prior engagement by ReShape in connection with certain capital raising transactions by ReShape. The complaint alleges that Wainwright is entitled to be paid a fee in connection with ReShape’s capital raising transaction under the warrant exercise agreement that ReShape entered into on June 28, 2021. Wainwright alleges that its June and September 2019 engagement agreements with ReShape require ReShape to pay Wainwright a cash fee equal to 8.0% of the gross proceeds that ReShape received from the exercise of warrants issued pursuant to those engagement agreements, including warrants that were exercised in the June 2021 transaction. The complaint also seeks reimbursement of Wainwright’s attorneys’ fees and interest in connection with its claim. The Company is unable to predict the ultimate outcome of this matter or estimate a range of possible exposure; therefore, no amounts have been accrued. The Company intends to vigorously defend this matter.

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 could have a material adverse effect on the Company’s business, operating results or financial condition.

Subsequent Events

12 Months Ended

Dec. 31, 2021

Subsequent Events

Subsequent Events

(17)

Subsequent Events

On February 16, 2022, the Company renewed the office space lease in San Clemente, California for one year. This lease renewal will commence on July 1, 2022, and end on June 30, 2023. The total estimated payments under this lease renewal are $0.3 million.

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The Company has prepared the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Reverse Stock Splits

Reverse Stock Splits

Principles of Consolidation

Principles of Consolidation

Use of Estimates

Use of Estimates

Acquisition

Acquisition

Cash and Cash Equivalents

Cash and Cash Equivalents

Restricted Cash

Restricted Cash


	December 31,		December 31,
	2021		2020
Cash and cash equivalents	$	22,765	$	2,957
Restricted cash		50		50
Total cash, cash equivalents, and restricted cash in the consolidated statement of cash flows	$	22,815	$	3,007

Accounts Receivable


	December 31,		December 31,
	2021		2020
Cash and cash equivalents	$	22,765	$	2,957
Restricted cash		50		50
Total cash, cash equivalents, and restricted cash in the consolidated statement of cash flows	$	22,815	$	3,007

Inventory

Inventory

Property and Equipment, Net

Property and Equipment, Net

Goodwill and Other Long-Lived Assets

Goodwill and Other 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.

Income Taxes

Equity

Foreign Currency

Revenue Recognition

payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products.

Variable Consideration

Warranty

For the vBloc product line, the Company has a 5-year warranty on all implantable parts. vBloc sales began in 2015 and ended in 2018, so this warranty period will go through 2023.

Contract Balances

The Company records a receivable when it has an unconditional right to receive consideration after the performance obligations are satisfied.

Practical Expedients

The Company has elected the practical expedient not to determine whether contracts with customers contain significant financing components for contracts with a duration of one year or less.

Advertising Cost

Advertising Cost

Advertising costs are expensed as incurred and totaled $3.0 million and $0.5 million for the years ended December 31, 2021 and 2020, respectively.

Research and Development Expenses

Research and Development Expenses

Stock-Based Compensation

Stock-Based Compensation

Net Loss Per Share

Net Loss Per Share


	December 31,
	2021	2020
Stock options	885,039	40
Unvested restricted stock units	1,711,318	—
Convertible preferred stock	38	1,288
Warrants	6,952,385	13,483,446

Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate

Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value.

Level 1 inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 inputs are observable, either directly or indirectly.

Level 3 inputs are unobservable due to little or no corroborating market data.

Recent Accounting Pronouncements

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.

December 15, 2022. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements.

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Reconciliation of cash, cash equivalents and restricted cash


	December 31,		December 31,
	2021		2020
Cash and cash equivalents	$	22,765	$	2,957
Restricted cash		50		50
Total cash, cash equivalents, and restricted cash in the consolidated statement of cash flows	$	22,815	$	3,007

Schedule of anti-dilutive securities


	December 31,
	2021	2020
Stock options	885,039	40
Unvested restricted stock units	1,711,318	—
Convertible preferred stock	38	1,288
Warrants	6,952,385	13,483,446

Supplemental Balance Sheet Information (Tables)

12 Months Ended

Dec. 31, 2021

Supplemental Balance Sheet Information

Schedule of components of inventory


	December 31,		December 31,
	2021		2020
Raw materials	$	829	$	174
Sub-assemblies		682		733
Finished goods		1,492		1,337
Total inventory	$	3,003	$	2,244

Schedule of components of prepaid expenses and other current assets


	December 31,		December 31,
	2021		2020
Prepaid insurance	$	736	$	619
Prepaid advertising and marketing		698		—
Prepaid contract research organization expenses		—		295
Other current assets		188		159
Total prepaid expenses and other current assets	$	1,622	$	1,073

Schedule of components of accrued and other liabilities


	December 31,		December 31,
	2021		2020
Payroll and benefits	$	1,527	$	1,735
Customer deposits		549		398
Taxes		307		265
Accrued insurance premium		301		272
Accrued professional		300		446
Other liabilities		185		514
Total accrued and other liabilities	$	3,169	$	3,630

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2021

Property and Equipment

Schedule of property and equipment


	December 31,
	2021		2020
Machinery and equipment	$	955	$	179
Furniture and equipment		38		83
Computer hardware and software		135		78
Tooling and molds		236		—
Leasehold improvements		23		19
Construction in progress		407		404
		1,794		763
Less accumulated depreciation and amortization		(340)		(179)
Property and equipment, net	$	1,454	$	584

Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets

Summary of identifiable intangible assets


	December 31, 2021
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Finite-lived intangible assets:
Developed technology	10.8	$	17,092	$	(4,467)	$	12,625
Trademarks/Tradenames	10.0		2,045		(790)		1,255
Covenant not to compete	3.0		76		(76)		0
			19,213		(5,333)		13,880
Indefinite-lived intangible assets:
In-process research and development	indefinite		6,947		—		6,947
Total		$	26,160	$	(5,333)	$	20,827


	December 31, 2020
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Finite-lived intangible assets:
Developed technology	10.0	$	14,362	$	(2,933)	$	11,429
Trademarks/Tradenames	10.0		2,045		(585)		1,460
Covenant not to compete	3.0		76		(76)		0
			16,483		(3,594)		12,889
Indefinite-lived intangible assets:
In-process research and development	indefinite		14,133		—		14,133
Total		$	30,616	$	(3,594)	$	27,022

Schedule of gross amount and accumulated impairment loss of indefinite-lived intangible assets


	December 31, 2020
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Finite-lived intangible assets:
Developed technology	10.0	$	14,362	$	(2,933)	$	11,429
Trademarks/Tradenames	10.0		2,045		(585)		1,460
Covenant not to compete	3.0		76		(76)		0
			16,483		(3,594)		12,889
Indefinite-lived intangible assets:
In-process research and development	indefinite		14,133		—		14,133
Total		$	30,616	$	(3,594)	$	27,022

Schedule of future amortization of Finite-Lived intangible assets


Year ending December 31,
2022	$	1,823
2023		1,823
2024		1,823
2025		1,823
2026		1,823
Thereafter		4,765
	$	13,880

Schedule of changes in the carrying amount of goodwill


Goodwill at December 31, 2020	$	—
Goodwill acquired during the year		21,623
Adjustments to purchase price allocation		(57)
Impairment of goodwill		(21,566)
Goodwill at December 31, 2021	$	—

Debt (Tables)

12 Months Ended

Dec. 31, 2021

Debt

Schedule of long-term debt instruments


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

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+ Details

Leases (Tables)

12 Months Ended

Dec. 31, 2021

Leases

Schedule of supplemental information related to operating leases


Balance sheet information at December 31, 2021
Operating lease ROU assets	$	266

Operating lease liabilities, current portion	$	279
Operating lease liabilities, long-term portion		-
Total operating lease liabilities	$	279

Cash flow information for the nine months ended September 30, 2021
Cash paid for amounts included in the measurement of operating leases liabilities	$	565

Schedule of maturities of operating lease liabilities


Twelve months ending December 31, 2021
2022	$	283
Total lease payments		283
Less: imputed interest		4
Total lease liabilities	$	279

Weighted-average remaining lease term at end of period (in years)		0.4
Weighted-average discount rate at end of period		5.1

Acquisitions (Tables)

12 Months Ended

Dec. 31, 2021

Acquisition

Schedule of fair values of the assets acquired and liabilities assumed


Current assets	$	5,887
Property and equipment, net		796
Right-of-use assets		335
Other assets		1,898
Goodwill		21,566
Developed technology		2,730
Liabilities assumed		(2,650)
Total purchase price		30,562
Less: cash acquired		(5,207)
Total purchase price, net of cash acquired	$	25,355

Schedule of pro forma results of operations of acquisition


	Revenue		Net Loss
	(Unaudited)		(Unaudited)
Combined entity: Supplemental pro forma from January 1, 2021 to December 31, 2021	$	13,432	$	(69,452)
Combined entity: Supplemental pro forma from January 1, 2020 to December 31, 2020		12,887		(33,965)

Warrants (Tables)

12 Months Ended

Dec. 31, 2021

Schedule of warrant activity





	Shares
Balance December 31, 2019	7,671,934
Issued	3,607,680	⁽¹⁾
Exercised	(3,227,079)	⁽²⁾
Cancelled	(1)
Balance December 31, 2020	8,052,534
Obtained due to merger	875,249	⁽³⁾
Issued	6,910,739	⁽⁴⁾
Exercised	(8,886,137)	⁽⁵⁾
Cancelled	—
Balance December 31, 2021	6,952,385

(1)	Warrants issued in 2020 includes 3,607,680 of three issuances of Series G warrants.

(2)	Warrants exercised in 2020 includes 1,741,502 of Series C pre-funded warrants at an exercise price of $0.21 per share, 1,452,329 Series F pre-funded warrants at an exercise price of $0.21 per share and 33,248 of placement agent warrants.

(3)	Obalon’s warrants outstanding at the time of the merger with the 1-for-3 reverse stock split adjustment. In addition, this amount includes 504,861 warrants converted into common shares in July of 2021, see Note 11 for further details.

(4)	Warrants issued in 2021 includes 563,700 of Series G warrants and 6,347,039 of warrants issued to various institutional investors.

(5)

Black Scholes Model

Schedule of warrant assumptions used to calculate fair value


	Warrants Outstanding		Strike Price	Volatility		Remaining Life	Risk Free Rate
January 19, 2021	563,700	$	6.21	97.1	%	5.0	0.45	%
June 28, 2021	5,947,039	$	6.00	97.6	%	5.0	0.90	%
July 16, 2021	400,000	$	4.04	157.7	%	5.0	0.79	%


	Warrants Outstanding		Strike Price	Volatility		Remaining Life	Risk Free Rate
First Issuance	1,200,000	$	3.70	97.0	%	5.0	0.56	%
Second Issuance	1,200,000	$	3.25	101.1	%	5.0	0.27	%
Third Issuance	4,000,000	$	3.50	100.8	%	5.0	0.37	%

Revenue Disaggregation and Operating Segments (Tables)

12 Months Ended

Dec. 31, 2021

Revenue Disaggregation and Operating Segments

Schedule of revenue disaggregated by product and geography


	Year Ended
	December 31,
	2021		2020
United States	$	10,297	$	8,275
Australia		1,039		1,086
Europe		2,127		1,824
Rest of world		137		114
Total revenue	$	13,600	$	11,299

Stock-based Compensation (Tables)

12 Months Ended

Dec. 31, 2021

Stock-based Compensation

Schedule of stock-based compensation expense


	Year Ended
	December 31,
	2021		2020
Sales and marketing	$	1,221	$	—
General and administrative		10,226		1,323
Research and development		1,305		—
Total stock-based compensation expense	$	12,752	$	1,323

Summary of assumptions used to estimate grant date fair value of stock options granted


Risk-free interest rate		0.01%
Expected term (in years)		10
Expected dividend yield		0.00%
Expected volatility		157.10%

Summary of unvested RSUs award activity


		Weighted
		Average
		Grant Date
	Shares	Fair Value
Unvested RSUs at December 31, 2020	—	$	—
Granted	3,610,572		4.36
Vested ⁽¹⁾	(1,899,254)		4.36
Cancelled/Forfeited	—		—
Non-vested RSUs at December 31, 2021	1,711,318		4.36

(1)

2003 Stock Incentive Plan, as amended and restated

Stock-based Compensation

Summary of stock option activity


				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
		Exercise Price		Contractual	Value
	Shares	Per Share		Life (years)	(in thousands)
Outstanding at December 31, 2019	39	$	2,130,682.62
Options granted	—		—
Options exercised	—		—
Options cancelled	—		—
Outstanding at December 31, 2020	39		2,130,682.62		$	—
Vested options obtained due to merger	366,410		35.88
Options granted	790,669		3.62
Options exercised	(182,696)		2.28
Options cancelled	(89,383)		1,025.23
Outstanding at December 31, 2021	885,039		8.85	8.9	$	—
Exercisable at December 31, 2021	600,057		7.97	8.6		—
Vested and expected to vest at December 31, 2021	885,039		10.03	8.9		—

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Income Taxes

Income tax expense (benefit)


	Year ended December 31,
	2021		2020
Deferred:
Federal	$	(69)	$	(84)
State		9		(2)
Deferred income tax benefit		(60)		(86)
Current:
Federal		—		—
State		11		1
Foreign		(57)		(96)
Total income tax benefit, net	$	(106)	$	(181)

Tax Rate Reconciliation


	Year ended December 31,
	2021			2020
Income tax benefit at U.S. federal statutory rate		21.0	%		21.0	%
State income tax benefit, net of federal benefit		3.3	%		4.2	%
Stock warrant valuation		(2.2)	%		(10.2)	%
Goodwill impairment		(7.7)	%		—	%
Stock-based compensation		(13.0)	%		—	%
Other permanent differences		(4.3)	%		(0.6)	%
Change in state tax rate		(0.8)	%		(0.3)	%
Foreign rate differential		—	%		0.5	%
Net operating loss true up		0.3	%		—	%
Other adjustments		2.3	%		1.4	%
Change in valuation allowance		1.4	%		(15.2)	%
Effective income tax rate		0.3	%		0.8	%

Deferred Tax Assets


	December 31,
	2021		2020
Deferred tax assets:
Start-up costs	$	1,225	$	1,192
Capitalized research and development costs		408		503
Reserves and accruals		1,679		9,235
Property and equipment		178		133
Research and development credit		3,323		1,194
Lease liability		74		41
Net operating loss carryforwards		54,653		30,156
State and local taxes		2		2
Total gross deferred tax assets		61,542		42,456
Valuation allowance		(61,380)		(39,803)
Deferred tax assets, net of valuation allowance		162		2,653
Intangible assets		(647)		(3,151)
Operating lease right-of-use assets		(70)		(117)
Total gross deferred tax liabilities		(717)		(3,268)
Net deferred tax liability	$	(555)	$	(615)

Summary of Significant Accounting Policies - Reverse Stock Splits (Details) $ in Thousands		12 Months Ended
	Jun. 15, 2021	Dec. 31, 2021 USD ($) customer	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Reverse stock split ratio	0.333
Cash and cash equivalents		$ 22,765	$ 2,957
Restricted cash		50	50
Total cash, cash equivalents, and restricted cash in the consolidated statement of cash flows		22,815	3,007	$ 2,985
Allowance for excess and slow moving inventory		800	$ 100
Inventory valuation reserves		$ 500
Number of customers \| customer		1
Reserves recorded against outstanding balance		$ 0
Obalon Therapeutics Inc.
Stock exchange ratio	0.5367
Accounts receivable \| Customer Concentration Risk \| Customer One
Percentage of total		24.00%
Minimum
Payment period for accounts receivable		30 days
Maximum
Payment period for accounts receivable		90 days

Summary of Significant Accounting Policies - Property and Equipment Useful Lives (Details)	12 Months Ended
	Dec. 31, 2021
Furniture and equipment \| Minimum
Property and equipment
Property and equipment estimated useful life	5 years
Furniture and equipment \| Maximum
Property and equipment
Property and equipment estimated useful life	7 years
Computer hardware and software \| Minimum
Property and equipment
Property and equipment estimated useful life	3 years
Computer hardware and software \| Maximum
Property and equipment
Property and equipment estimated useful life	5 years

Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Revenue Recognition
Restocking fee (as a percent)	10.00%
Warranty term	30 days
Practical Expedients	true
Advertising cost	$ 3.0	$ 0.5
LAP-BAND product \| Maximum
Revenue Recognition
Threshold period for right to return or exchange products purchased	30 days
ReShape vBloc product
Revenue Recognition
Warranty term	5 years

Summary of Significant Accounting Policies - Anti-dilutive Securities (Details) - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Stock options
Anti-dilutive securities
Anti-dilutive securities (in shares)	885,039	40
Unvested restricted stock units
Anti-dilutive securities
Anti-dilutive securities (in shares)	1,711,318
Convertible preferred stock
Anti-dilutive securities
Anti-dilutive securities (in shares)	38	1,288
Warrants to purchase common stock
Anti-dilutive securities
Anti-dilutive securities (in shares)	6,952,385	13,483,446

Summary of Significant Accounting Policies - Credit Risk Concentration (Details)	12 Months Ended
	Dec. 31, 2021 $ / shares
Concentration of credit risk
Concentration risk
Money market funds preserve the value of investment per share	$ 1.00

Liquidity and Management's Plans (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Liquidity and Management's Plans
Working capital	$ 22,900
Cash and cash equivalents and restricted cash	22,815	$ 3,007	$ 2,985
Accounts receivable	2,815	2,620
Accumulated deficit	$ 576,760	$ 514,827

- Definition

The cumulative amount of the reporting entity's undistributed earnings or deficit.

+ References + Details

Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Inventory:
Raw materials	$ 829	$ 174
Sub-assemblies	682	733
Finished goods	1,492	1,337
Total inventory	3,003	2,244
Prepaid expenses and other current assets:
Prepaid insurance	736	619
Prepaid advertising and marketing	698
Prepaid contract research organization expenses		295
Other current assets	188	159
Total prepaid expenses and other current assets	1,622	1,073
Accrued and other liabilities:
Payroll and benefits	1,527	1,735
Customer deposits	549	398
Taxes	307	265
Accrued insurance premium	301	272
Accrued professional	300	446
Other liabilities	185	514
Total accrued and other liabilities	3,169	$ 3,630
Raw materials acquired from Obalon	$ 600

Property and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Property and equipment
Property and Equipment, Gross	$ 1,794	$ 763
Less accumulated depreciation and amortization	(340)	(179)
Property and equipment, net	1,454	584
Depreciation	232	15
Machinery and equipment
Property and equipment
Property and Equipment, Gross	955	179
Furniture and equipment
Property and equipment
Property and Equipment, Gross	38	83
Computer hardware and software
Property and equipment
Property and Equipment, Gross	135	78
Tooling and molds
Property and equipment
Property and Equipment, Gross	236
Leasehold improvements
Property and equipment
Property and Equipment, Gross	23	19
Construction in progress
Property and equipment
Property and Equipment, Gross	$ 407	$ 404

Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	7 Months Ended	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Acquisition.
Amortization expense		$ 1,739	$ 1,652
Gross Carrying Amount	$ 19,213	19,213	16,483
Accumulated amortization	(5,333)	(5,333)	(3,594)
Total finite-lived intangible assets	13,880	13,880	12,889
Indefinite-lived intangible assets	6,947	6,947	14,133
Gross carrying amount	26,160	26,160	30,616
Net book value	20,827	20,827	$ 27,022
Goodwill acquired during the year		21,623
Adjustments to goodwill		57
Goodwill impairment		21,566
Decrease in goodwill, adjustments to warrants		500
Increase in goodwill, adjustments to inventory		400
Obalon Therapeutics Inc.
Acquisition.
Goodwill acquired during the year		$ 21,600
Goodwill impairment	21,600
Developed technology
Acquisition.
Useful Life (years)		10 years 9 months 18 days	10 years
Gross Carrying Amount	17,092	$ 17,092	$ 14,362
Accumulated amortization	(4,467)	(4,467)	(2,933)
Total finite-lived intangible assets	12,625	12,625	$ 11,429
Developed technology \| Obalon Therapeutics Inc.
Acquisition.
Intangible assets acquired		$ 2,700
Useful life		15 years
Trademarks/Tradenames
Acquisition.
Useful Life (years)		10 years	10 years
Gross Carrying Amount	2,045	$ 2,045	$ 2,045
Accumulated amortization	(790)	(790)	(585)
Total finite-lived intangible assets	1,255	$ 1,255	$ 1,460
Covenant not to compete
Acquisition.
Useful Life (years)		3 years	3 years
Gross Carrying Amount	76	$ 76	$ 76
Accumulated amortization	(76)	(76)	(76)
Total finite-lived intangible assets	0	0	0
In-process research and development
Acquisition.
Indefinite-lived intangible assets	$ 6,947	$ 6,947	$ 14,133

Goodwill and Intangible Assets - Gross Amount and Accumulated Impairment Loss (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Goodwill and Intangible Assets
Gross amount	$ 20,721	$ 20,721
Accumulated impairment loss	(13,774)	(6,588)
Indefinite-lived intangible assets, net	$ 6,947	$ 14,133

Goodwill and Intangible Assets - Expected Amortization (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Estimated amortization of intangible assets
2022	$ 1,823
2023	1,823
2024	1,823
2025	1,823
2026	1,823
Thereafter	4,765
Total finite-lived intangible assets	$ 13,880	$ 12,889

Goodwill and Intangible Assets - Roll Forward (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)
Goodwill [Roll Forward]
Goodwill acquired during the year	$ 21,623
Adjustments to purchase price allocations	(57)
Impairment of goodwill	$ (21,566)

Impairment of Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2021	Dec. 31, 2020
Impairment of Intangible Assets and Goodwill
Indefinite-lived intangible assets impairment	$ 0		$ 0
Discount rate		21.70%
Finite-lived intangible assets impairment		$ 7,200
Goodwill impairment		$ 21,566

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

- Definition

Amount, after unamortized (discount) premium and debt issuance costs, of long-term debt. Includes, but not limited to, notes payable, bonds payable, debentures, mortgage loans and commercial paper. Excludes capital lease obligations.

+ References + Details

Debt - CARES Act (Details) - USD ($) $ in Thousands		12 Months Ended
Debt - CARES Act (Details) - USD ($) $ in Thousands	Apr. 24, 2020	Dec. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Amount received			$ 955
Employee retention credit		$ 500
PPP loan
Debt Instrument [Line Items]
Amount received	$ 1,000
Discount rate (as a percent)	1.00%

Debt - Credit agreement (Details) - USD ($) $ / shares in Units, $ in Thousands									12 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	Dec. 31, 2021	Dec. 31, 2020	Jul. 15, 2021
Short-term Debt [Line Items]
Amount received										$ 955
Loss on extinguishment of debt, net									$ 2,061	7,715
Debt discount										545
Warrant exercise price (in dollars per share)							$ 0.12
Proceeds from warrant exercises							$ 600		45,616	679
Payment of credit agreement									$ 10,500
Total debt										13,322
Series G Warrants
Short-term Debt [Line Items]
Number of shares in exchange of warrant exercise									563,700
Minimum
Short-term Debt [Line Items]
Warrant exercise price (in dollars per share)											$ 13.20
Credit agreement
Short-term Debt [Line Items]
Agreement amount								$ 3,500
Amount received					$ 500	$ 500		2,500
Additional borrowing amount		$ 1,000						$ 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
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
Credit agreement \| Series G Warrants
Short-term Debt [Line Items]
Warrants issued				1,200,000				1,200,000
Number of shares in exchange of warrant exercise		1,000,000		1,200,000				1,200,000
Credit agreement \| LIBOR
Short-term Debt [Line Items]
Credit facility bear interest		2.50%	2.50%	2.50%
Credit agreement third amendment
Short-term Debt [Line Items]
Amount received				$ 1,000
Additional borrowing amount				2,000
Remaining borrowing capacity				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
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
Total debt									$ 0
Credit agreement fourth amendment \| Series G Warrants
Short-term Debt [Line Items]
Warrants issued			4,000,000

Debt - Asset Purchase Consideration Payable (Details)	Dec. 31, 2021 USD ($)
Secured debt \| Discount rate
Long-term debt
Debt fair value measurement input	0.051

Leases - Supplemental Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Leases
Operating lease costs	$ 600	$ 300
Balance sheet information related to operating leases
Operating lease ROU assets	266	465
Operating lease liabilities, current	279	314
Operating lease liabilities, long-term portion		$ 163
Total operating lease liabilities	279
Cash flow information related to operating leases
Cash paid for amounts included in the measurement of operating leases liabilities	$ 565

Leases - Maturities of Liabilities (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Maturities of operating lease liabilities
2022	$ 283
Total lease payments	283
Less: imputed interest	4
Total lease liabilities	$ 279
Weighted-average remaining lease term at end of period (in years)	4 months 24 days
Weighted-average discount rate at end of period	5.10%

Acquisition (Details) - Obalon Therapeutics Inc. - USD ($) $ in Millions		12 Months Ended
	Jun. 15, 2021	Dec. 31, 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

Acquisition - Fair value of assets acquired and liabilities assumed (Details) - USD ($) $ in Thousands		12 Months Ended
	Jun. 15, 2021	Dec. 31, 2021
Fair values of the assets acquired and liabilities assumed
Total purchase price, net of cash acquired		$ 25,355
Obalon Therapeutics Inc.
Fair values of the assets acquired and liabilities assumed
Current assets	$ 5,887
Property and equipment, net	796
Right-of-use assets	335
Other assets	1,898
Goodwill	21,566
Developed technology	2,730
Liabilities assumed	(2,650)
Total purchase price	30,562
Less: cash acquired	(5,207)
Total purchase price, net of cash acquired	$ 25,355

Acquisition - Narrative (Details) $ / shares in Units, $ in Thousands			7 Months Ended	12 Months Ended
	Jul. 15, 2021 USD ($) item $ / shares	Jun. 15, 2021 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Apr. 15, 2020 $ / shares
Acquisition.
Warrant liability	$ 1,300	$ 2,000
Decrease in warrant liability	$ 700			$ (703)	$ 61
Number of holders exercised fundamental transaction option \| item	1
Warrant exercise price (in dollars per share) \| $ / shares						$ 0.12
Fair value portion of warrants	$ 900
Reclassification of warrants	$ 500
Revenue				13,600	11,299
Net loss				61,933	$ 21,630
Goodwill impairment				$ 21,566
Minimum
Acquisition.
Warrant exercise price (in dollars per share) \| $ / shares	$ 13.20
Maximum
Acquisition.
Warrant exercise price (in dollars per share) \| $ / shares	$ 15.00
Discount rate \| Income approach
Acquisition.
Discount rate			0.220	0.220
Risk Free Rate
Acquisition.
Warrant fair value measurement inputs	0.0044
Volatility
Acquisition.
Warrant fair value measurement inputs	1.221
Expected dividends
Acquisition.
Warrant fair value measurement inputs	0
Obalon Therapeutics Inc.
Acquisition.
Revenue			$ 0
Net loss			2,000
Goodwill impairment			$ 21,600
Obalon Therapeutics Inc. \| Developed technology
Acquisition.
Useful life				15 years

Acquisition - Pro forma results of operations of acquisition (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Acquisition
Revenue	$ 13,432	$ 12,887
Net Loss	$ (69,452)	$ (33,965)

Equity - Issuance of stock and warrants (Details) - USD ($) $ / shares in Units, $ in Thousands											12 Months Ended
	Sep. 15, 2021	Aug. 11, 2021	Jul. 13, 2021	Jun. 28, 2021	Jun. 21, 2021	Jun. 18, 2021	Dec. 03, 2020	Jun. 23, 2020	May 28, 2020	Apr. 15, 2020	Dec. 31, 2021	Dec. 31, 2020	Jul. 16, 2021	Jul. 15, 2021
Equity
Common stock issued for professional services (in shares)									50,000
Warrant exercise price (in dollars per share)										$ 0.12
Warrants exercise price expressed													95.00%
Percentage of common stock issued				75.00%
Proceeds from warrant exercises										$ 600	$ 45,616	$ 679
Payment of credit agreement											10,500
Stock issued (in shares)					187,674	200,000
Stock options exercised (in shares)	72,666		18,166			91,864
Proceeds from stock options exercised	$ 200		$ 42			$ 200					417
Cashless exercise of warrants (in shares)								58,981
Common stock issued for professional services									$ 200			$ 205
Institutional exercise of warrants (in shares)										5,085,834
Credit agreement
Equity
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
Minimum
Equity
Warrant exercise price (in dollars per share)														$ 13.20
Maximum
Equity
Warrant exercise price (in dollars per share)														$ 15.00
2019 private placement
Equity
Proceeds from warrant exercises					$ 100		$ 100
Stock issued (in shares)							580,000
Restricted Shares
Equity
Common stock issued for professional services (in shares)		37,500
Contract expiration term		6 months
Common stock issued for professional services											$ 130
Unvested restricted stock units
Equity
Stock issued (in shares)											1,899,254
June 2021 warrants
Equity
Issuance of common stock upon exercise of warrants, net of transaction costs (in shares)				7,900,000
Proceeds from warrant exercises				$ 45,500
June 2021 warrants \| Credit agreement
Equity
Proceeds to repay				10,800
Payment of credit agreement				10,500
Accrued interest				$ 300
New Unregistered Warrants
Equity
Number of shares in exchange of warrant exercise				5,900,000
Warrant exercise price (in dollars per share)				$ 6.00
Issuance of common stock upon exercise of warrants, net of transaction costs (in shares)				7,100,000
Cash purchase price per share				$ 0.09375
Exchange Warrants
Equity
Number of shares in exchange of warrant exercise													504,861
Warrant exercise price (in dollars per share)													$ 4.038
New Warrants
Equity
Warrant exercise price (in dollars per share)													$ 4.038
Warrants term													5 years
New Warrants \| Maximum
Equity
Number of shares in exchange of warrant exercise													400,000
Series C convertible preferred stock
Equity
Preferred stock liquidation preference per share											$ 274.88
Common Stock
Equity
Common stock issued for professional services (in shares)												28,185
Stock options exercised (in shares)											182,696
Cashless exercise of warrants (in shares)												33,248
Institutional exercise of warrants (in shares)											8,886,137	3,193,831
Common Stock \| Restricted Shares
Equity
Common stock issued for professional services (in shares)											37,500
Stock issued (in shares)											1,899,254

Warrants - Activity (Details) - shares	12 Months Ended
Warrants - Activity (Details) - shares	Dec. 31, 2021	Dec. 31, 2020
Warrants.
Balance (in shares)	8,052,534	7,671,934
Obtained due to merger	875,249
Issued (in shares)	6,910,739	3,607,680
Exercised (in shares)	(8,886,137)	(3,227,079)
Cancelled (in shares)		(1)
Balance (in shares)	6,952,385	8,052,534

Warrants - Activity - Additional Information (Details) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Jul. 31, 2021 shares	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2020 $ / shares shares	Jul. 15, 2021 USD ($)
Warrants
Issued (in shares)		6,910,739	3,607,680
Warrants exercised (in shares)		8,886,137	3,227,079
Reclassification of warrants \| $				$ 500
Additional warrant expense \| $		$ 2,813
Warrant Expense \| $		$ 2,813
Reverse stock split ratio, warrants		0.333
Warrants converted in to common stock.	504,861	504,861
Risk Free Rate
Warrants
Warrant fair value measurement inputs				0.0044
Expected dividends
Warrants
Warrant fair value measurement inputs				0
Volatility
Warrants
Warrant fair value measurement inputs				1.221
Series A warrants
Warrants
Warrants exercised (in shares)		1,879,002
Warrants exercised (in dollars per share) \| $ / shares		$ 4.68
Series E warrants
Warrants
Warrants exercised (in shares)		1,879,002
Warrants exercised (in dollars per share) \| $ / shares		$ 6.00
Series G Warrants
Warrants
Issued (in shares)			3,607,680
Warrants exercised (in shares)		4,171,380
Warrants issued		563,700
Series G Warrants \| Minimum
Warrants
Warrants exercised (in dollars per share) \| $ / shares		$ 5.77
Series G Warrants \| Maximum
Warrants
Warrants exercised (in dollars per share) \| $ / shares		$ 6.00
Placement agent warrants
Warrants
Warrants exercised (in shares)			33,248
Institutional Investors
Warrants
Warrants issued		6,347,039
Series C pre-funded warrants
Warrants
Warrants exercised (in shares)		64,218	1,741,502
Warrants exercised (in dollars per share) \| $ / shares		$ 0.21	$ 0.21
Series F prefunded warrants
Warrants
Warrants exercised (in shares)		387,674	1,452,329
Warrants exercised (in dollars per share) \| $ / shares		$ 0.21	$ 0.21

Warrants - Warrant assumptions (Details)	Dec. 31, 2021 $ / shares shares	Jul. 15, 2021	Dec. 31, 2020 $ / shares shares	Dec. 31, 2019 shares
Class of Warrant or Right [Line Items]
Warrants Outstanding (in shares)	6,952,385		8,052,534	7,671,934
First Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants Outstanding (in shares)			1,200,000
Second Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants Outstanding (in shares)			1,200,000
Third Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants Outstanding (in shares)			4,000,000
January 19, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants Outstanding (in shares)	563,700
June 28, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants Outstanding (in shares)	5,947,039
July 16, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants Outstanding (in shares)	400,000
Strike Price \| First Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| $ / shares			3.70
Strike Price \| Second Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| $ / shares			3.25
Strike Price \| Third Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| $ / shares			3.50
Strike Price \| January 19, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| $ / shares	6.21
Strike Price \| June 28, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| $ / shares	6.00
Strike Price \| July 16, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs \| $ / shares	4.04
Volatility
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs		1.221
Volatility \| First Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			0.970
Volatility \| Second Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			1.011
Volatility \| Third Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			1.008
Volatility \| January 19, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.971
Volatility \| June 28, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.976
Volatility \| July 16, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	1.577
Remaining Life \| First Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants term			5 years
Remaining Life \| Second Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants term			5 years
Remaining Life \| Third Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants term			5 years
Remaining Life \| January 19, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants term	5 years
Remaining Life \| June 28, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants term	5 years
Remaining Life \| July 16, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrants term	5 years
Risk Free Rate
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs		0.0044
Risk Free Rate \| First Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			0.0056
Risk Free Rate \| Second Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			0.0027
Risk Free Rate \| Third Issuance \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs			0.0037
Risk Free Rate \| January 19, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.0045
Risk Free Rate \| June 28, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.0090
Risk Free Rate \| July 16, 2021 placement agent warrants \| Black Scholes Model
Class of Warrant or Right [Line Items]
Warrant fair value measurement inputs	0.0079

Revenue Disaggregation and Operating Segments (Details) $ in Thousands	7 Months Ended	12 Months Ended
	Dec. 31, 2021 USD ($) item	Dec. 31, 2021 USD ($) item	Dec. 31, 2020 USD ($)
Revenue Recognition
Revenue		$ 13,600	$ 11,299
Gross Profit		$ 8,348	6,262
Number of Products in Development Stage \| item	2	2
United States
Revenue Recognition
Revenue		$ 10,297	8,275
Australia
Revenue Recognition
Revenue		1,039	1,086
Europe
Revenue Recognition
Revenue		2,127	1,824
Rest of world
Revenue Recognition
Revenue		137	114
Obalon Therapeutics Inc.
Revenue Recognition
Revenue	$ 0
ReShape Vest and Diabetes Bloc-Stim Neuromodulation Products
Revenue Recognition
Revenue		$ 0	$ 0

Stock-based Compensation - Plan Description (Details) - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2018	Jan. 01, 2022
Stock options
Stock-based compensation
Option expiration period	10 years
Award vesting period	4 years
2003 Stock Incentive Plan, as amended and restated
Stock-based compensation
Number of additional shares authorized		26
Number of shares authorized for plan as a percentage of stock outstanding	15.00%
Shares authorized	3,067,949		4,107,096
Shares available for grant	1,510,739
2003 Stock Incentive Plan, as amended and restated \| Minimum
Stock-based compensation
Purchase price of common stock (as a percent)	100.00%
2003 Stock Incentive Plan, as amended and restated \| Principal (10 percent) owner \| Minimum
Stock-based compensation
Purchase price of common stock (as a percent)	110.00%
2003 Stock Incentive Plan, as amended and restated \| Stock options
Stock-based compensation
Award vesting period	4 years
2003 Stock Incentive Plan, as amended and restated \| Stock options \| Maximum
Stock-based compensation
Option expiration period	10 years

Stock-based Compensation - Stock Option Activity (Details) - USD ($)					12 Months Ended
	Sep. 15, 2021	Aug. 18, 2021	Jul. 13, 2021	Jun. 18, 2021	Dec. 31, 2021	Dec. 31, 2020
Shares
Shares, Options granted (in shares)						0
Shares, Options exercised (in shares)	(72,666)		(18,166)	(91,864)
Additional disclosures
One-time stock -based compensation charge					$ 12,752,000	$ 1,323,000
Certain employees \| First anniversary date of employee retroactively
Additional disclosures
One-time stock -based compensation charge		$ 1,600,000
Stock options
Additional disclosures
Vesting Period					4 years
Unrecognized share-based expenses					$ 900,000
Weighted average period					2 years 4 months 24 days
Option expiration period					10 years
Stock options \| Certain employees
Shares
Shares, Options granted (in shares)		790,669				0
Stock options \| Certain employees \| First anniversary date of employee retroactively
Additional disclosures
Vesting percentage		25.00%
Stock options \| Certain employees \| Last day of each of next 36 months
Additional disclosures
Vesting percentage		75.00%
Vesting Period		36 months
2003 Stock Incentive Plan, as amended and restated
Shares
Shares outstanding, Beginning balance (in shares)					39	39
Shares, Vested options obtained due to merger (in shares)					366,410
Shares, Options granted (in shares)					790,669
Shares, Options exercised (in shares)					(182,696)
Shares, Options cancelled (in shares)					(89,383)
Shares outstanding, Ending balance (in shares)					885,039	39
Shares, Exercisable (in shares)					600,057
Shares, Vested and expected to vest (in shares)					885,039
Weighted Average Exercise Price
Weighted Average Exercise Price Outstanding, Beginning balance (in dollars per share)					$ 2,130,682.62	$ 2,130,682.62
Weighted Average Exercise Price, Vested options obtained due to merger (in dollars per share)					35.88
Weighted Average Exercise Price, Options granted (in dollars per share)					3.62
Weighted Average Exercise Price, Options exercised (in dollars per share)					2.28
Weighted Average Exercise Price, Options cancelled (in dollars per share)					1,025.23
Weighted Average Exercise Price Outstanding, Ending balance (in dollars per share)					8.85	$ 2,130,682.62
Weighted Average Exercise Price, Exercisable (in dollars per share)					7.97
Weighted Average Exercise Price, Vested and expected to vest (in dollars per share)					$ 10.03
Weighted Average Remaining Contractual Life
Weighted Average Remaining Contractual Life Outstanding					8 years 10 months 24 days
Weighted Average Remaining Contractual Life, Exercisable					8 years 7 months 6 days
Weighted Average Remaining Contractual Life, Vested and expected to vest					8 years 10 months 24 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value Outstanding (in dollars)					$ 0
Aggregate Intrinsic Value, Exercisable (in dollars)					0
Vested and expected to vest (in dollars)					$ 0
2003 Stock Incentive Plan, as amended and restated \| Stock options
Additional disclosures
Vesting Period					4 years

Stock-based Compensation - Fair Value of Stock Options (Details) - Stock options	12 Months Ended
	Dec. 31, 2021
Stock-based compensation
Risk-free interest rate (as a percent)	0.01%
Expected term (in years)	10 years
Expected dividend yield (as a percent)	0.00%
Expected volatility (as a percent)	157.10%

Stock-based Compensation - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Jul. 22, 2021	Dec. 31, 2021	Dec. 31, 2020
Additional disclosures
One-time stock -based compensation charge		$ 12,752	$ 1,323
Unvested restricted stock units
Shares
Shares, Granted (in shares)	3,610,572	3,610,572
Shares, Vested (in shares)		(1,899,254)
Non-vested RSUs, Ending balance (in shares)		1,711,318
Weighted Average Grant Date Fair Value
Weighted Average Grant Date Fair Value, Granted (in dollars per share)		$ 4.36
Weighted Average Grant Date Fair Value, Vested (in dollars per share)		4.36
Non-vested RSUs, Ending balance (in dollars per share)		$ 4.36
Additional disclosures
Vested and undistributed		47,848
Unrecognized compensation costs		$ 4,600
Recognition period		2 years
Unvested restricted stock units \| First anniversary date of employee retroactively
Additional disclosures
Vesting percentage	50.00%
Unvested restricted stock units \| Last day of each of next 36 months
Additional disclosures
Vesting percentage	50.00%
Unvested restricted stock units \| Certain members of management
Shares
Shares, Granted (in shares)	2
Unvested restricted stock units \| Certain members of management \| First anniversary date of employee retroactively
Shares
Shares, Granted (in shares)	1
Additional disclosures
Vesting percentage	25.00%
One-time stock -based compensation charge	$ 7,300
Unvested restricted stock units \| Certain members of management \| Last day of each of next 36 months
Additional disclosures
Vesting percentage	75.00%
Vesting Period	36 months
Unvested restricted stock units \| Board of Directors
Additional disclosures
Vesting Period	36 months

Stock-based Compensation - Expense for Stock-Based Awards (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Compensation expense recognized
Stock-based compensation expense	$ 12,752	$ 1,323
Sales and marketing
Compensation expense recognized
Stock-based compensation expense	1,221
General and administrative expense
Compensation expense recognized
Stock-based compensation expense	10,226	$ 1,323
Research and development
Compensation expense recognized
Stock-based compensation expense	$ 1,305

Income Taxes - Income Tax Benefit (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Deferred:
Federal	$ (69)	$ (84)
State	9	(2)
Deferred income tax benefit	(60)	(86)
Current:
State	11	1
Foreign	(57)	(96)
Total income tax benefit, net	$ (106)	$ (181)

- Definition

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

+ References + Details

Income Taxes - Tax Rate Reconciliation (Details)	12 Months Ended
Income Taxes - Tax Rate Reconciliation (Details)	Dec. 31, 2021	Dec. 31, 2020
Income Taxes
Income tax benefit at U.S. federal statutory rate	21.00%	21.00%
State income tax benefit, net of federal benefit	3.30%	4.20%
Stock warrant valuation	(2.20%)	(10.20%)
Goodwill impairment	(7.70%)
Stock-based compensation	(13.00%)
Other permanent differences	(4.30%)	(0.60%)
Change in state tax rate	(0.80%)	(0.30%)
Foreign rate differential		0.50%
Net operating loss true up	0.30%
Other adjustments	2.30%	1.40%
Change in valuation allowance	1.40%	(15.20%)
Effective income tax rate	0.30%	0.80%

Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Deferred tax assets (liabilities):
Start-up costs	$ 1,225	$ 1,192
Capitalized research and development costs	408	503
Reserves and accruals	1,679	9,235
Property and equipment	178	133
Research and development credit	3,323	1,194
Lease liability	74	41
Net operating loss carryforwards	54,653	30,156
State and local taxes	2	2
Total gross deferred tax assets	61,542	42,456
Valuation allowance	(61,380)	(39,803)
Deferred tax assets, net of valuation allowance	162	2,653
Intangible assets	(647)	(3,151)
Operating lease right-of-use assets	(70)	(117)
Total gross deferred tax liabilities	(717)	(3,268)
Net deferred tax liability	$ (555)	$ (615)

Income Taxes - Carryforwards and Limitations (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Income taxes
Net operating losses subject to expiration	$ 82.5
Research and development credits, operating loss carryforwards	3.4
Unrecognized tax benefits	0.0	$ 0.0
Unrecognized tax benefits, income tax penalties and interest accrued	$ 0.0
Minimum
Income taxes
Percentage of change in ownership	50.00%
State
Income taxes
Net operating loss carryforwards amount	$ 280.9	222.4
Net operating losses subject to expiration	91.0
Foreign
Income taxes
Net operating loss carryforwards amount	0.2	0.3
U.S. federal
Income taxes
Net operating loss carryforwards amount	178.2	$ 77.2
Net operating loss carryforwards subject to expiration and IRC Section 382 limitation	$ 1.2
Carryover period	20 years

Commitments and Contingencies (Details) - USD ($) $ in Thousands	Aug. 18, 2021	Aug. 06, 2021	Dec. 31, 2021	Dec. 31, 2020
Employee Arrangements and Other Compensation
Severance benefits payable			$ 1,800
Purchase Commitments
Purchase commitments			4,100
Accrued liabilities
Employee Arrangements and Other Compensation
Accrued performance bonuses			$ 900	$ 1,300
Cowen and Company
Litigation
Service fees sought		$ 1,350
Loss contingency accrual		$ 0
H. C. Wainwright and Company
Litigation
Percentage of gross proceeds received from the exercise of warrants issued pursuant to capital raising engagement agreements sought	8.00%
Loss contingency accrual	$ 0

Subsequent Events (Details) - Subsequent Event $ in Millions	Feb. 16, 2022 USD ($)
Subsequent Event [Line Items]
Lease renewal term	1 year
Total estimated payments under lease renewal	$ 0.3