UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20192020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 000-55195

GI DYNAMICS, INC.

(Exact name of registrant as specified in its charter)

(781) 357-3300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  ☐ Yes ☒ No

The aggregate market value of the registrant’s common stock, in the form of CHESS Depositary Interests (“CDI” in singular, “CDIs” in plural,plural), each CDI representingrepresented 1/50^th of one share of common stock), held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate),stock computed by reference to the price at which the CDIs were last sold on June 28 2019,30, 2020, the last business day of the registrant’s most recently completed second quarter, as reported on the Australian Securities Exchange (“ASX”), was $19,603,047$3,767,612 (A$27,952,442)5,489,744).

The registrant’s common stock is publicly traded on the ASX in the form of CDIs convertible at the option of the holders into shares ofOn July 22, 2020, the registrant’s common stock on a 1-for-50 basis.was removed from the Official List of the Australian Securities Exchange and the CHESS Depository Trust was dissolved and all CDIs were automatically converted to shares of common stock, with fractional shares being redeemed for cash payment. The total number of shares of the registrant’s common stock outstanding on March 12, 2020, including shares of common stock underlying CDIs,5, 2021 was 36,598,291.88,095,659.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file with the Securities and Exchange Commission a proxy statement pursuant to Regulation 14A or an amendment to this report filed under cover of Form 10-K/A containing the information required to be disclosed under Part III of Form 10-K within 120 days of the end of its fiscal year ended December 31, 2019.2020. Portions of such proxy statement or Form 10-K/A are incorporated by reference into Part III of this Annual Report on Form 10-K.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements as defined in Section 27A of the United States Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Throughout this Annual Report on Form 10-K, all references to the “Company” or “GI Dynamics,”Dynamics” unless where the context requires otherwise, refers to the consolidated entity of GI Dynamics, Inc. These forward-looking statements concern the Company’s business, operations, financial performance and condition as well as plans, objectives and expectations for the Company’s business, operations and financial performance and condition. Any statements contained in this Annual Report on Form 10-K that are not of historical facts may be deemed to be forward-looking statements. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements about the Company’s:

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “aims,” “assumes,” “goal,” “intends,” “objective,” “potential,” “positioned,” “target,” “continue,” “seek,” “vision,” or the negative thereof and similar expressions intended to identify forward-looking statements.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company’s business and the industry in which it operates and management’s beliefs and assumptions. These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond the Company’s control. As a result, any or all forward-looking statements in this Annual Report on Form 10-K may later become inaccurate. The Company may not actually achieve the plans, intentions or expectations disclosed in any forward-looking statements, and actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements made by the Company. The Company has included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements made.

You are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. You should read this Annual Report on Form 10-K and the documents that the Company has filed as exhibits to the GI Dynamics Form 10-K completely and with the understanding that actual future results may be materially different from what the Company expects. These forward-looking statements speak only as at the date of this Annual Report on Form 10-K. Unless required by law, the Company does not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks described in the reports the Company will file from time to time with the SEC after the date of this Annual Report on Form 10-K.

GI DYNAMICS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 20192020

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

Overview

GI Dynamics, Inc. (“GI Dynamics” or “the Company”) is a clinical stage medical device company focused on the development and commercialization of EndoBarrier, a medical device system intended for treatment of patients with type 2 diabetes and reduction of obesity. EndoBarrier is a medical implant designated for the treatment of type 2 diabetes and the reduction of obesity with nearly 4,000 implants since inception and is the subject of an approved FDA pivotal trial in the United States under which the Company initiated patient implant procedures in January 2020. The Company believes that EndoBarrier represents a paradigm-breaking approach to traditional management of type 2 diabetes, which has focused historically solely on lifestyle intervention and diabetes medications. According to the article “Challenges in Diabetes Management: Glycemic Control, Medication Adherence, and Healthcare Costs,” published in the American Journal of Managed Care in 2017, these historical treatments for type 2 diabetes are limited in efficacy, with approximately 40% of patients achieving glycemic control.

EndoBarrier represents the first material departure from this historical approach. The Company believes that EndoBarrier offers an adjunct to non-insulin diabetes pharmacotherapy, while providing patients a chance to significantly reduce or eliminate insulin and increase the likelihood of avoiding invasive and permanent bariatric or metabolic surgery.EndoBarrier is designed to mimic the mechanism of action of the duodenal-jejunal exclusion currently created by gastric bypass surgery (which is referred to as Roux-en-Y Gastric Bypass, or RYGB)^,as explained in the article “EndoBarrier: A Safe and Effective Novel Treatment for Obesity and Type 2 Diabetes?”, published in Obesity Surgery in 2018 by Nisha Patel. After implanting EndoBarrier, the patient’s food that exits the stomach will flow through the inside of the EndoBarrier Liner, and therefore will not contact the wall of the upper intestine (duodenum and jejunum). The food will also not mix with fluids from the pancreas and bile duct until these fluids and the food reach the far end of the EndoBarrier Liner. It is believed that, in a similar fashion to RYGB, shunting the food to a more distant location in the upper intestines triggers hormonal responses that regulate key factors that help control hunger, satiety, and insulin sensitivity, which is also explained in the article by Nisha Patel.

EndoBarrier has been shown in multiple independent clinical studies to lower blood sugar levels (as measured by hemoglobin A1c or HbA1c), reduce excess body weight, increase insulin sensitivity, and positively affect other health metrics and comorbidities. Because it has been utilized in approximately 4,000 procedures, EndoBarrier has a thoroughly characterized benefit-risk profile. A recent independent meta-analysis published in 2018 by Pichamol Jirapinyo in American Diabetes Association (ADA) Diabetes Care, “Effects of the Duodenal-Jejunal Bypass Liner on Glycemic Control in Patients with Type 2 Diabetes with Obesity: A Meta-Analysis with Secondary Analysis on Weight Loss and Hormonal Changes,” provides the most comprehensive review and meta-analysis of EndoBarrier clinical data to date. In addition, two ongoing EndoBarrier registries in the UK and Germany have captured and reported clinical results on more than 800 patients between the two databases. These registries as well as other investigator-initiated trials continue to release clinical data on an annual basis, largely centered around the annual meetings hosted by DDW (Digestive Disease Week) in May, ADA (American Diabetes Association) in June, EASD (European Association for the Study of Diabetes) in October, and Obesity Week in November.

Business Strategy

The Company’s goal is to become the leading provider of alternative options for treating type 2 diabetes and concurrently reducing obesity. The Company’s corporate priorities include:

The Company is focused on the successful execution of the STEP-1 pivotal trial in the United States. In August 2018, GI Dynamics received notification from the FDA that it had approved the Investigational Device Exemption (“IDE”) application for EndoBarrier, pendingand received required Institutional Review Board (IRB) approval, which was received in February 2019. The approved EndoBarrier IDE represents the pivotal clinical trial for EndoBarrier.

The STEP-1 clinical trial is a randomized, controlled, double blinded trial with 3:1 randomization between patients who receive the EndoBarrier implant (3) and the control group made up of patients who will receive a sham procedure and not receive the EndoBarrier implant (1). Both arms will maintain pharmacotherapy within ADA guidelines and will receive lifestyle and nutritional counseling consistent with ADA guidelines. The primary endpoint of the trial is reduction of HbA1c from baseline to removal of the EndoBarrier at twelve months as compared to the control group. The study includes numerous secondary endpoints, including changes in weight, cardiovascular risk metrics, as well as health metrics related to NAFLD (non-alcoholic fatty liver disease) and NASH (non-alcoholic steatohepatitis), and CKD (chronic kidney disease).

The STEP-1 clinical trial consists of two stages. The first stage consists of 50 EndoBarrier patients and approximately 17 control patients. At the end of stage 1, the Company will submit four DMC (Data Monitoring Committee) reports to the FDA for review. Upon a successful completion of the stage 1 review, the Company will submit a request to the FDA to complete the study by conducting stage 2, which the Company anticipates will be comprised of 130 EndoBarrier patients and approximately 43 control patients for a study total of 240 patients (180 EndoBarrier and 60 control patients). There is no guarantee that this will be the final composition of the study, as the number of remaining stages or remaining patients may vary based on the stage 1 clinical data and the outcome of the stage 1 review with FDA. In addition to the multiple staged study, the FDA has mandated certain stopping rules which, if triggered, could result in the STEP-1 study having enrollment or treatment delayed or stopped.

On January 27, 2020, the first patient was randomized into the STEP-1Trial Protocol. The Company is focused on continuous recruitment and patient managementOn March 11, 2020, the World Health Organization declared the outbreak of patients within the STEP-1 trial.

If the Company does not have adequate funds to ensure the complete treatment course of all patients to be enrolled in the STEP-1 clinical trial, the Company reserves funds ata coronavirus (“COVID-19”) pandemic. From the time of implant,that declaration, the public safety restrictions adopted at the federal, state, and individual clinic policy level have impacted the ability to enroll patients after March 11, 2020. The EndoBarrier implantation procedure is classified as an elective procedure and was thus impacted by policies that disallowed elective procedures. In the fourth quarter of 2020, select clinical trial sites have been engaged in pre-screening activities to identify potential enrollees, although an increase in COVID-19 positivity rates and resulting policies on a per implantedelective procedures, patient basis,caution, and individual infections have prevented randomization of any additional enrollees prior to ensureMarch 11, 2021. The Company continues to focus on potential patient identification and will resume enrollment and randomization as early as possible, presumably in the Company has adequate cash availablefirst half of 2021 due to ensure patient safety through the completionavailability of the patient careSARS-Cov2 vaccines and patient safety monitoring course as detailed in the protocol. Onassumption that the completion of sufficient financingvaccines will continue to ensure funds will be available to ensure completionprovide protection against emergent viral variants. Pending timely release of the STEP-1 trial protocol for any patients implanted as part ofCOVID-19 restrictions, the Step-1 study, these individual patient reserves will be returned to general operating funds. The Company expects to complete the enrollment of Stage 1 by the end of 2020.2021.

GI Dynamics is focused on the successful execution of the EndoBarrier trial in India as part of its partnership with Apollo Sugar, which was announced on November 27, 2018.

The I-STEP study is also a randomized, controlled, double blinded trial with 3:1 randomization between patients who receive the EndoBarrier implant (3) and the control group made up of patients who will not receive the EndoBarrier implant (1). The primary endpoint of the trial is reduction of HbA1c from baseline to removal of the EndoBarrier at twelve months as compared to the control group. The study includes numerous secondary endpoints, including changes in weight and reduction in cardiovascular risk metrics. The study includes 100 patients in total, which consists of 75 patients who will receive the EndoBarrier implant and 25 control patients. Up to five clinical sites in India will participate in the study.

Apollo Sugar is a collaboration between Apollo Health & Lifestyle Limited and Sanofi. Apollo Sugar is a division of Apollo Hospitals Group (Apollo) focused on the treatment of metabolic disorders and operates an integrated network of centers of excellence for diabetes, obesity and endocrinology. Apollo is the largest private hospital system in India and has emerged as Asia’s foremost integrated healthcare services provider, maintaining a robust presence of hospitals, pharmacies, primary care and diagnostic clinics across the healthcare ecosystem. Since its inception, Apollo has treated over 65 million patients from 141 countries.

In April 2020, the Company and Apollo Sugar will filefiled a pre-trial application with the Central Drugs Standards Control Organization (CDSCO) in India to obtain approval to initiate the I-STEP trial. As of March 11, 2021, the Company has not received communication from CDSCO regarding the timing of a response to the application, with the delay likely related to COVID-19 disruption in India. The Company expects to receive approval and initiate the trial prior toin the endfirst half of 2021, pending the third quarterremoval of 2020. TheCOVID-19 disruption and restrictions. Once initiated, the partners anticipate trial enrollment will take less than 12 months.

GI Dynamics and Apollo Sugar leadership are working to finalize the terms of the GI Dynamics-Apollo Sugar partnership that will focus on the marketing, distribution and clinical support of EndoBarrier to appropriate patients in India, Southeast Asia and the Middle East. Final terms of the proposed collaboration are subject to negotiation and will be disclosed upon completion.

CE Marking of a product is a manufacturer’s declaration that a product meets the applicable health, safety, and environmental requirements outlined in the appropriate European product legislation and has undergone the relevant conformity assessment procedure. A CE Mark is required before the Company can market EndoBarrier in the EU and certain Middle Eastern countries.

GI Dynamics previously announced that it was working In 2020, the standards for a medical device CE mark were scheduled to change from the Medical Device Directive (“MDD”) to the more stringent Medical Device Regulation (“MDR”), but largely due to the impacts of COVID-19, the deadline for conversion to MDR has been postponed. The Company has initiated the review process under MDD regulation with Intertek, a new Notified Body, headquartered in London, UK. GI Dynamics has ended this relationship and is working with a different Notified Body. A notified body evaluatesthe independent third party commissioned to evaluate the conformity of products and the associated quality systems for manufacturers that seek to sell products in Europe. The Company’s new Notified Body has initiated the process of working through EndoBarrier clinical data and the Company’s Quality Management System. The Company will release the name of the new Notified Body when the final agreement between GI Dynamics and the new Notified Body has been completed. Management believes that the attainment of CE Mark is achievable by the end of 2020.

GI Dynamics continues to support the ongoing efforts of multiple clinicians as they develop new EndoBarrier clinical data. Multiple investigator-initiated clinical trials released clinical data in 2019. It is expected that these clinical trials will continue to release data into 2020 and beyond.

GI Dynamics also supports two primary registries that continue to release clinical data. The Association of British Clinical Diabetologists (ABCD) Worldwide EndoBarrier Registry contains over 500 patient data points with the goal of analyzing and releasing clinical data for more than 1,000 patients. The German EndoBarrier Registry contains over 300 patient data points. The patients within these two registries are non-overlapping. Both registries are expected to continue releasing clinical data highlighting the EndoBarrier treatment effect on an annual basis.

The release of clinical data has historically focused and is expected to continue focusing on the annual clinical data releases at the following scientific meetings: Digestive Disease Week (DDW) in May, American Diabetes Association (ADA) in June, European Association for the Study of Diabetes (EASD) in October, and Obesity Week in November.

GI Dynamics will continue to invest in expanding its intellectual property portfolio. The Company’s current patent portfolio is composed of 84 issued and pending U.S. and non-U.S. patents.  The Company has 33 granted U.S. patents and 15 pending U.S. patent applications.  The Company has also sought intellectual property protection outside the U.S. and has 8 issued patents in Germany and the United Kingdom and 28 pending patent applications across China, the European Patent Convention region, Hong Kong, Israel and India.

The Company’s current issued patents expire between 2023 and 2035. GI Dynamics also actively monitors its intellectual property by regularly reviewing new developments to identify extensions to the patent portfolio. The Company employs external patent attorneys to assist in managing the Company’s intellectual property portfolio.

Summary

In summary, GI Dynamics believes that EndoBarrier represents the most effective new treatment option in a market dominated by pharmaceutical companies generating annual revenue in excess $40 billion. The Company believes that EndoBarrier is poised to have a transformative and disruptive effect on the type 2 diabetes market. EndoBarrier is one of the few treatment options that treats type 2 diabetes, concurrently reduces obesity, and continues to show lasting treatment effects post treatment in many patients. As the duration of the EndoBarrier treatment effect continues to increase in published literature and because, to date, there has been minimal observed clinical risk after EndoBarrier removal, the EndoBarrier risk-benefit balance continues to evolve in an increasingly positive manner.

Background of the Disease

Diabetes mellitus type 2 (also known as type 2 diabetes) is a long-term progressive metabolic disorder characterized by high blood sugar, insulin resistance, and reduced insulin production. People with type 2 diabetes represent 90-95% of the worldwide diabetes population; only 5-10% of this population is diagnosed with type 1 diabetes (a form of diabetes mellitus wherein little to no insulin is produced).

Being overweight is a condition where the patient’s body mass index (BMI) is greater than 25 (kg/m²); obesity is a condition where the patient’s BMI is greater than 30, with some countries applying a lower metric to both definitions. Obesity and its comorbidities contribute to the progression of type 2 diabetes. Many experts believe obesity contributes to higher levels of insulin resistance, which creates a feedback loop that increases the severity of type 2 diabetes for many patients.

When considering treatment for type 2 diabetes, it is optimal to address obesity concurrently with diabetes. According to the article “Mechanisms of Insulin Resistance in Obesity,” published in Frontiers of Medicine in 2013 by Jianping Ye, absent the concurrent reduction of obesity with the treatment of type 2 diabetes, obesity will likely continue to contribute to the progressive nature of type 2 diabetes. It is the Company’s belief that the inability of the current pharmacologic options to fully treat type 2 diabetes is due to the fact that diabetes medications generally treat blood sugar levels only and do not contribute substantially to weight loss.

Current Treatment Options

According to the American Diabetes Association 2018 Standards of Medical Care in Diabetes, the current treatment paradigm for type 2 diabetes is lifestyle therapy combined with pharmacological treatment, whereby treating clinicians prescribe a treatment regimen of one to four concurrent medications that could include insulin. Insulin usage carries a significant risk of increased mortality and may contribute to weight gain, which in turn may lead to higher levels of insulin resistance and increased levels of blood sugar, as explained in the article “Insulin-associated weight gain in diabetes--causes, effects and coping strategies,” by Russel-Jones, D. Only 40% of patients treated pharmacologically for type 2 diabetes are adequately managed, meaning that medication does not lower blood sugar adequately and does not halt the progressive nature of diabetes for these patients, as explained in the article “Adherence to Therapies in Patients with Type 2 Diabetes,” by Luis-Emilio Garcia-Perez.

The current pharmacological treatment algorithms for type 2 diabetes fall short of ideal, creating a large and unfilled efficacy gap. GI Dynamics believes that EndoBarrier, which is designed to mimic the mechanism of action of duodenal-jejunal exclusion currently created by RYGB gastric bypass surgery and operates in a relatively similar manner by reducing both weight and long-term blood sugar levels, can fill this gap by treating type 2 diabetes and reducing obesity in a unique minimally invasive and reversible manner.

Market Opportunity

Unmet Clinical Needs in the Treatment of Type 2 Diabetes and Obesity.

In 2019, the International Diabetes Federation estimated there were approximately 463 million people with type 2 diabetes worldwide. Diabetes is the leading cause of cardiovascular disease, kidney failure, blindness, and lower-limb amputation in almost all countries.

Three years after initial diagnosis, over half of patients with type 2 diabetes require multiple drug therapies. Studies have shown that only 40% of the type 2 diabetes population is adequately managed pharmacologically, as explained in the article “Challenges in Diabetes Management: Glycemic Control, Medication Adherence, and Healthcare Costs,” published in the American Journal of Managed Care in 2017. At ten years post diagnosis, most patients, despite insulin use in many, struggle to reach their hemoglobin A1c (HbA1c) treatment goals. HbA1c is a glycosylated hemoglobin molecule found in the bloodstream that is formed when red blood cells are exposed to blood glucose. HbA1c has become the generally accepted gold standard biomarker for measuring levels of diabetes control in clinical practice and in human trials.

Many patients and health care systems struggle to meet the financial burden imposed by the numerous concurrent medications required to attempt to control the progressive nature of type 2 diabetes.

According to the World Health Organization, in 2016 more than 1.9 billion adults 18 and older were overweight. Of these, 650 million people worldwide are diagnosed with obesity (BMI ³ > 30 kg/m ²), a condition often leading to serious health consequences such as cardiovascular disease, diabetes, musculoskeletal disorders, and some cancers.

Those suffering from both type 2 diabetes and obesity, also referred to as diabesity, total more than 169 million worldwide, represent a significant public health problem not only in the United States (US) but also globally, as explained in the article “Epidemiology of Obesity and Diabetes and Their Cardiovascular Complications,” published in the Circulation Research in 2016 by Shilpa Bhupathiraju. GI Dynamics believes that the unchecked worldwide rate of growth of the type 2 diabetes and obesity patient population represents one of the greatest unmanaged health risks in all of health care.

GI Dynamics believes EndoBarrier can treat patients with type 2 diabetes and reduce obesity in a safe, effective, nonpharmacological, and nonpermanent manner.

The Efficacy Gap

The Company’s intent in developing and seeking regulatory approval for EndoBarrier is to help clinicians deliver a unique treatment option to those patients suffering from type 2 diabetes, a disease state that sorely lacks innovative and broadly effective new treatment options.

GI Dynamics and its scientific advisors feel there must be a change in how the medical establishment currently treats obese patients suffering from type 2 diabetes because current treatment options are not effective. According to the International Diabetes Federation, the number of obese patients progressing to later stages of type 2 diabetes continues to grow at an alarming rate. Yet less than half of all type 2 diabetes patients are adequately managed by pharmacotherapy, and insulin carries serious risks and may in many cases contribute to the further progression of obesity. At the extreme end of the treatment spectrum, the treatment options are limited to different types of bariatric or metabolic surgery, which are highly invasive and irreversible procedures. Less than 1% of patients who are eligible for bariatric or metabolic surgery opt to undergo the procedure, as explained in the article “Recent advances in clinical practice challenges and opportunities in the management of obesity,” published by Andres Acosta in 2015 in the Gut .

The graphic above illustrates the multiple treatment options during the course of progression of type 2 diabetes:

A significant and rapidly growing patient population falls into the efficacy gap, wherein the patient is inadequately managed by medication yet unwilling to undergo gastric bypass surgery. For patients who elect to undergo bariatric or metabolic surgery, the clinical gains may not be permanent, while the risk associated with the procedure is permanent. These risks include, but are not limited to, excessive bleeding, blood clots, infection and in some cases death. GI Dynamics believes that because EndoBarrier is minimally invasive, can mimic the effects of gastric bypass, and has minimal side-effects, EndoBarrier can uniquely fill this efficacy gap, as explained in the article “EndoBarrier: A Safe and Effective Novel Treatment for Obesity and Type 2 Diabetes?” published in Obesity Surgery in 2018 by Nisha Patel.

The EndoBarrier Solution

EndoBarrier is intended for the treatment of type 2 diabetes and the reduction of obesity in a minimally invasive and reversible manner. EndoBarrier is designed to mimic the mechanism of action of duodenal-jejunal exclusion created by gastric bypass surgery. The EndoBarrier System is provided sterile and consists of an EndoBarrier Liner preloaded, packaged and sterilized within the EndoBarrier Delivery System. The EndoBarrier Delivery System is utilized to deliver the EndoBarrier Liner to the proximal small intestine. The EndoBarrier Liner is removed using the EndoBarrier Retrieval System.

The EndoBarrier System consists of three primary components:

EndoBarrier has been shown in multiple company-sponsored and independent clinical studies to lower blood sugar levels (hemoglobin A1c or HbA1c), reduce excess body weight, and positively affect other health metrics and comorbidities.

EndoBarrier is not currently approved or commercially available in any jurisdiction.  In August 2018, GI Dynamics received notification from the FDA that it had approved its IDE application, pending IRB approval which was received in February 2019. To gain regulatory approval to commercialize EndoBarrier in the United States, the Company must submit a pre-market authorization (PMA) application for review and approval by the FDA.  In January 2020, GI Dynamics initiated treatment of patients in the STEP-1 pivotal clinical trial, which is the registration trial for the PMA application.

The EndoBarrier Effect

Obesity has been shown to exacerbate insulin resistance and contribute to the progression of type 2 diabetes. In situations where lifestyle modification and pharmacotherapy have failed and surgery is not an option or is considered a therapy of last resort, EndoBarrier is intended to reduce blood sugar and weight. In clinical trials in both the United States and outside of the United States, EndoBarrier has been shown to:

EndoBarrier utilization accomplishes this in many patients by affecting key hormones involved in insulin sensitivity, glucose metabolism, satiety, and food intake. (See the section titled “How EndoBarrier Works: EndoBarrier Mechanism of Action.”)

The Company’s intent in positioning EndoBarrier to fill the type 2 diabetes efficacy gap with concurrent reduction of obesity is to help patients and clinicians avoid the initiation of insulin therapy by helping many patients maintain lower HbA1c levels and slow or halt the progression of type 2 diabetes. Furthermore, for those patients whose type 2 diabetes has progressed to the point where insulin therapy is necessary, EndoBarrier has been shown in many cases to lower HbA1c levels to the point where insulin dosage can be reduced, or insulin is no longer needed.

Finally, if the progression of type 2 diabetes is severe enough to warrant gastric bypass surgery, the Company expects that EndoBarrier either may serve as an opportunity to control type 2 diabetes so that surgery may not be needed, or at least better prepare the patient for bariatric surgery by lowering weight and helping control other comorbidities prior to surgery.

How EndoBarrier Works: EndoBarrier Mechanism of Action

The EndoBarrier mechanism of action is thought to be based on its functional similarities in many ways to RYGB. Once the EndoBarrier is implanted into the duodenum and proximal jejunum, ingested food passing through the EndoBarrier during the normal digestive process is prevented from interacting with the epithelium, microbiota, mucosal layer, or biliopancreatic secretions within the duodenum and proximal jejunum. In addition, EndoBarrier acts as a physical barrier that prevents the interaction of food with pancreatic enzymes and bile until reaching the end of the EndoBarrier Liner. Pancreatic enzymes and bile pass outside EndoBarrier and mix with the food at the distal end of the liner, where absorption ultimately takes place in the intestine. Thus, EndoBarrier creates a functional and reversible bypass of the upper intestine. Unlike RYGB surgery, EndoBarrier does not require an invasive and permanent surgical procedure or permanent physical modification of the stomach and exclusion of the distal stomach from the alimentary flow.

The Company’s scientific team and advisors have postulated the following EndoBarrier mechanisms of action, based on scientific evidence from such articles as “Effects of the Duodenal-Jejunal Bypass Liner on Glycemic Control in Patients with Type 2 Diabetes with Obesity: A Meta-Analysis with Secondary Analysis on Weight Loss and Hormonal Changes,” published in Diabetes Care in 2018 by Pichamol Jirapinyo and “The EndoBarrier: Duodenal-Jejunal Bypass Liner for Diabetes and Weight Loss,” published in Hindawi in 2018 by Aruchuna Ruban.:

Exclusion of the duodenum — This may offset an abnormality of gastrointestinal physiology responsible for insulin resistance and type 2 diabetes.

There is no known evidence of occurrence of clinically significant caloric malabsorption with EndoBarrier. EndoBarrier covers only 60 cm of duodenal and proximal jejunal mucosa, which most likely represents less than 10% of the length of the small intestine and leaves almost the entire jejunum and ileum for digestion and absorption.

Operations and Financing

GI Dynamics began selling EndoBarrier in Europe and South America in 2010 and in Australia in 2011. Since inception, the Company has distributed almost 4,000 units of EndoBarrier and generated a total of $7.8 million in revenue. The Company has incurred net losses in each year since its inception.

The Company has five subsidiaries: GI Dynamics Securities Corporation, a Massachusetts-incorporated nontrading entity; GID Europe Holding B.V., a Netherlands-incorporated nontrading holding company; GID Europe B.V., a Netherlands-incorporated company that conducts certain European business operations; GID Germany GmbH, a German-incorporated company that conducts certain European business operations; and GI Dynamics Australia Pty Ltd, an Australia-incorporated company that conducts Australian business operations.

GI Dynamics has raised net proceeds of approximately $273$283 million through sales of the Company’s equity and placement of debt, of which $9.3$9.5 million was received in 2019 as a result2020 that included the debt portion of the Company’s 2019 financings. Historically,financing and the Initial Close of the September 2020 Series A Preferred Stock Financing. Prior to going public on the Australian Securities Exchange (“ASX”), the Company generated $75.7 million in proceeds, net of expenses, through the sale of convertible preferred stock to a number of US venture capital firms, two global medical device manufacturers, and qualified individual investors prior to going public.investors. In June 2011, the Company issued convertible term promissory notes to several of its stockholders totaling $6 million. In September 2011, the Company conducted an Initial Public Offering (“IPO”) in Australia and simultaneously conducted a private placement of CDIs to accredited investors in the United States. Net proceeds from these financings approximated $72.5 million, net of expenses and repayment of the June 2011 notes. In connection with the IPO, all existing shares of preferred stock were converted into common stock.

InBetween July 2013 and August 2013,December 2016, GI Dynamics raised approximately $52.5$84.3 million, net of expenses, in an offeringofferings of the Company’s CDIs to qualified investors in Australia, the United States, and certain other jurisdictions. In May 2014, the Company raised approximately $30.8 million, net of expenses, in an offering of the Company’s CDIs to qualified investors in Australia, Hong Kong, the United Kingdom, and certain other jurisdictions.

In December 2016, GI Dynamics raised approximately $1 million, net of expenses, in an offering of the Company’s CDIs to qualified investors in Australia and certain other jurisdictions.

investors. In January 2017, GI Dynamics raised approximately $0.2 million, net of expenses, in an offering of the Company’s CDIs under a Security Purchase Plan (“SPP”) available to security holders having a registered addressand in Australia or New Zealand.

In June 2017, GI Dynamics placed a Convertible Secured Term Promissory Note (the “2017 Note”) financing with Crystal Amber Fund Limited (“Crystal Amber”, see Note 9 of the Company’s largest stockholder and a Related Party for ASX purposes)Consolidated Financial Statements for a gross amount of $5 million. The 2017 Note accrues interest at 5% per annum, compounded annually. In December 2018, the maturity datemore complete description of the 2017 Note was extended from December 31, 2018 to March 31, 2019 in exchange for paymentterms and conditions of the total accrued interest on the 2017 Note at December 31, 2018, which approximated $394 thousand. The maturity date of the 2017 Note was extended four additional times in 2019, with the most recent being the August 21 extension of the maturity date from September 1, 2019 to March 31, 2020.

In July 2017, GI Dynamics signed a manufacturing agreement with its contract manufacturing partner Proven Process Medical Devices (“PPMD”)financing).

In February and March 2018, GI Dynamics raised approximately $1.6 million in an offering of the Company’s CDIs to qualified investors including certain existing investors,and in Australia, the United States and the United Kingdom.

In May 2018, GI Dynamics placed a Convertible Term Promissory Note and Warrant (the “2018 Note and Warrant”) with Crystal Amber, see Note 9 of the Consolidated Financial Statements for a note principal amountmore complete description of $1.75 million. The 2018 Note accrues interest at 10% per annum, compounded annually,the terms and could be converted to CDIs at $0.018 per CDI until maturity on May 30, 2023. The warrants conferredconditions of the right to purchase 97,222,200 CDIs for $0.018 per CDI with anti-dilution protections.

financing). In September and November 2018, GI Dynamics raised approximately $5 million in an offering of the Company’s CDIs to qualified investors, including certain existing investors, in Australia, the United States and the United Kingdom.investors.

In October 2018, GI Dynamics announced that it signed an agreement with its new notified body Intertek to pursue CE marking of EndoBarrier in Europe. The Company has since suspended its relationship with Intertek and is working with a different notified body whose identity will be announced when the service agreement is finalized.

body. In November 2018, the Company signed a clinical trial agreement and a memorandum of understanding with its clinical and potential commercial partner Apollo Sugar, a division of Apollo Hospitals Group located in India.

In December 2018, GI Dynamics announced the appointment of Charles Carter, a consultant, as the Company’s Chief Financial Officer and Secretary. Mr. Carter became an employee of the Company on September 1, 2019.

In March 2019, the Company completed a Note Purchase Agreement (“March 2019 NPA”) detailing a convertible term promissory note (the “March 2019 Note”) and warrant (the “March 2019 Warrant”) financing with Crystal Amber for a gross amount of $1 million. The March 2019 Note compounded interest annually at 10% and, subject to Stockholder Approval required under ASX Listing Rules, Crystal Amber was conferred the right to optionally convert all unpaid principal and interest to CDIs at $0.0127 per CDI before the Note Maturity date in March 2024. Per the March 2019 NPA, the Company agreed to issue a warrant (the “March 2019 Warrant”) to Crystal Amber, pending stockholder approval, to purchase 78,984,823 CDIs (representing 1,579,696 shares of common stock) at an initial exercise price of $0.0127 per CDI. The issue of the March 2019 Warrant required the approval of stockholders and was not exercisable until its issue was approved on June 30, 2019. (Seemillion (see Note 9 of the Consolidated Financial Statements for a more complete description of the terms and conditions of the financing).

In March 2019, the maturity date of the 2017 Note was extended to May 1, 2019. In April 2019, the maturity date of the 2017 Note was extended to July 1, 2019.

In May 2019, the Company completed a convertible term promissory note (the “May 2019 Note”) and warrant (the “May 2019 Warrant”) financing with Crystal Amber for a gross amount of $3 million. The May 2019 Note compounded interest annually at 10% and, subject to Stockholder Approval required under ASX Listing Rules, Crystal Amber was conferred the right to optionally convert all unpaid principal and interest to CDIs at $0.0127 per CDI before the Note Maturity date in May 2024. Per the May 2019 NPA, the Company contingently issued a warrant (the “May 2019 Warrant”) to Crystal Amber, pending stockholder approval, to purchase 236,220,472 CDIs (representing 4,724,409 shares of common stock) at an initial exercise price of $0.0127 per CDI. The issue of the May 2019 Warrant required the approval of stockholders and was not exercisable until its issue was approved on June 30, 2019. (See(see Note 9 of the Consolidated Financial Statements for a more complete description of the terms and conditions of the financing).

In June 2019, the maturity date of the 2017 Note was extended to October 1, 2019.

On June 30, 2019, Crystal Amber elected to convert the 2018 Note, the March 2019 Note and the May 2019 Note into CDIs. Under the terms of the respective notes, an aggregate of 453,609,963 CDIs (representing approximately 9,072,197 shares of common stock) were subscribed but unissued on conversion and concurrent cancellation of the 2018 Note, the March 2019 Note and the May 2019 Note. The CDIs were issued on July 3, 2019.  .

On August 21, 2019, the Company and Crystal Amber entered into a securities purchase agreement for a total funding of up to approximately $10 million (the “August 2019 SPA”). The initial $5.4 million was comprised of existing warrant exercises scheduled between August 25, 2019 and November 15, 2019. Exercises included the 2018 Warrant, the March 2019 Warrant, and the May 2019 Warrant issued to Crystal Amber, as further detailed above. The remaining amount of the August 2019 funding was represented by a Convertible Term Promissory Note (“August 2019 Note”) of up to approximately $4.6 million and a related Warrant (“August 2019 Warrant”) in substantially the same form as the March 2019 and May 2019 convertible term promissory note. Under the terms of the August 2019 SPA and 2019 Note, the Company, at its sole discretion, elected to request the entire $4.6 million to be funded before December 6, 2019, but then amended the election to allow funding in tranches at Crystal Amber’s election before January 15, 2020. The conversion feature allows the conversion of the August 2019 Note unpaid principal and interest at $0.02 per CDI and the August 2019 Warrant, upon its issue, allowed the purchase for $0.02 per CDI of that number of CDIs represented by the August 2019 Note principal divided by $0.02 per CDI. (See, see Note 9 of the Consolidated Financial Statements for a more complete description of the terms and conditions of the financing).

On In a series of scheduled transactions between August 21, 2019 the maturity date of the 2017 Note was extended to March 31, 2020.

On August 25,and November 2019, Crystal Amber exercised the 2018 Warrant, and a portion of the March 2019 Warrant, in accordance withand the May 2019 Warrant per the terms of the August 2019 SPA. For an aggregate cash payment of $2 million, 97,222,200 CDIs (representing approximately 1,944,444 shares of common stock) were issued at $0.0144 per CDI under the 2018 Warrant and 47,244,119 CDIs (representing approximately 944,882 shares of common stock) were issued at $0.0127 per CDI under the March 2019 Warrant.

On September 30, 2019, Crystal Amber exercised the remaining portion of the March 2019 Warrant and a portion of the May 2019 Warrant in accordance with the August 2019 SPA. For an aggregate cash payment of $2 million, 31,740,704 CDIs (representing approximately 634,814 shares of common stock) were issued at $0.0127 per CDI under the March 2019 Warrant and 125,739,610 CDIs (representing approximately 2,514,792 shares of common stock) were issued on October 4, 2019 at $0.0127 per CDI under the May 2019 Warrant. As of September 30, 2019, this was recorded as a subscription receivable from a related party and the cash was received on October 1, 2019.

On October 31, 2019, Crystal Amber exercised another portion of the May 2019 Warrant in accordance with the August 2019 SPA. For an aggregate cash payment of $1 million, 78,740,157 CDIs (representing approximately 1,574,803 shares of common stock) were issued on November 4, 2019 at $0.0127 per CDI under the May 2019 Warrant. Cash was received on October 31, 2019.

On November 15, 2019, Crystal Amber exercised the final portion of the May 2019 Warrant in accordance with the August 2019 SPA. For an aggregate cash payment of approximately $0.4 million, 31,740,748 CDIs (representing approximately 634,814 shares of common stock) were issued on November 18, 2019 at $0.0127 per CDI under the May 2019 Warrant. Cash was received on November 15, 2019.

On December 2, 2019, GI Dynamics provided notice to Crystal Amber that the Company elected to place the August 2019 Note at the full amount, on or before December 6, 2019. In December 2019, the Company and Crystal Amber agreed to confer the right to tranchedefer the funding of the August 2019 Note in amounts and per timing chosen solely by Crystal Amber, provided the August 2019 Note total was funded on or beforeto January 15, 2020.

On December 16, 2019, GI Dynamics stockholders approved the August 2019 Note conversion feature and the issuance of the August 2019 Warrant, pending funding of the August 2019 Note by Crystal Amber.

On January 13, 2020, GI Dynamics received approximatelythe $4.6 million in cash representing the full funding of the August 2019 Note. As stockholder approval had been obtained in December 2019, the August 2019 Note became convertible atwas funded by Crystal Amber’s sole discretion until maturity in August 2024. Additionally,Amber and the August 2019 Warrant was issued to Crystal Amber, providing for the purchase of up to 229,844,650 CDIs (representing 4,596,893 shares of common stock) at $0.02 per CDI.

On June 18, 2020, the Company entered into a Note Purchase Agreement (“June 2020 NPA”) by and between the Company and Crystal Amber. Pursuant to the June 2020 NPA, the Company issued and sold to Crystal Amber, a Convertible Promissory Note in an aggregate original principal amount of $750 thousand, with terms including mandatory conversion in the event of the close of a Series A Preferred Stock offering.

On July 13, 2020, Crystal Amber provided the Company with a notice of optional conversion of the 2017 Note. On the conversion date, the principal of $5 million and the accrued and unpaid interest of $390,240 totaling $5,390,240 was converted into 2,574,873,400 CDIs, which was equivalent to 51,497,468 shares of Common Stock. The conversion price equaled $0.002093 per CDI or $0.10467 per share of Common Stock. On receipt of the notice issued the available 38,401,704 shares and the Company and Crystal Amber executed a Right to Shares and Waiver Agreement in which the Company agreed to issue the remaining 13,095,764 shares of Common Stock owed under the conversion when the Company had received shareholder approval and had increased the authorized number of shares of common stock to allow for issuance of the remaining shares. The additional shares were issued September 3, 2020.

On July 22, 2020, GI Dynamics was removed from the Official List of the ASX and all CDIs were converted to shares of Common Stock, with cash redemption of fractional shares. The CHESS Depository Nominee was subsequently dissolved. Although the Company’s securities are not traded on any exchange, the Company remains subject to SEC reporting requirements.

On August 4, 2020, the Company entered into a Note Purchase Agreement (“August 2020 NPA”) by and between the Company and Crystal Amber. Pursuant to the August 2020 NPA, the Company issued and sold to Crystal Amber, a Convertible Promissory Note in an aggregate original principal amount of $500 thousand (the “August 2020 Note”) with terms including mandatory conversion in the event of the close of a Series A Preferred Stock offering. The Company received $250 thousand on August 3, 2020 and the remaining $250 thousand on August 6, 2020.

On September 4, 2020, the Company executed a series of financing-related agreements (“the September 2020 Financing”) which included the cancellation of the August 2019 Warrant, the restructuring of the August 2019 Note into the September 2020 Note (see below for a detailed description of the September 2020 Note and the accounting classification of the August 2019 Note restructuring into the September 2020 Note), the conversion of the June and August 2020 Convertible Notes into shares of Series A Preferred Stock (see below for a detailed description of the June and August 2020 Notes and Note 10 to the Consolidated Financial Statements for a description of the Series A Preferred Stock), and the sale of $8.75 million of Series A Preferred Stock to Crystal Amber under the Series A Preferred Stock Purchase Agreement (the “Series A SPA”, see Note 11 to the Consolidated Financial Statements for a description of the Series A SPA terms). The Initial Close of the September 2020 Financing occurred on September 4, 2020, and included all components of the September 2020 Financing, including the Crystal Amber purchase of 42,310,730 shares of Series A Preferred Stock for gross proceeds of $3.75. Pursuant to the Series A SPA and subsequent amendments, the second and final close (the “Second Close”) was originally to occur on October 31, 2020 but through a series of extensions, was extended until February 24, 2021. On February 24, 2021, an individual investor closed the purchase of 600,000 shares of Series A Preferred Stock for approximate proceeds of $53 thousand. Effective February 24, 2021, Crystal Amber executed a contract amendment restructuring the Second Close to include the sale of 16,924,292 shares of Series A Preferred Stock for proceeds of $1.5 million to close on March 4, 2021, the sale of 11,282,861 shares of Series A Preferred Stock for proceeds of $1.5 million to close no later than March 25, 2021, and the remaining 27,607,153 shares of Series A Preferred Stock for proceeds of $2.45 million to close no later than May 28, 2021.

On October 8, 2020, Mr. Joseph Virgilio was appointed Chief Operating Officer of the Company.

On October 20, 2020, Ginger Glaser was appointed a Director of the Company.

On November 2, 2020, Mr. Scott Schorer resigned as President and Chief Executive Officer of the Company and Mr. Joseph Virgilio was appointed Chief Executive Officer and a director of the Company.

On December 31, 2020, Charles Carter, the Company’s Chief Financial Officer, Secretary and Treasurer, ceased to be an employee of the Company and executed a retention bonus agreement and a consulting agreement. Mr. Carter remains the Company’s Chief Financial Officer, Secretary and Treasurer.

The rights of the Company’s stockholders are governed by Delaware general corporation law.

GI Dynamics is headquartered in Boston, Massachusetts, where the majority of the Company’s employees work. The Company has subsidiaries in the Netherlands, Germany, and Australia, with employees in Germany and Australia.

2019Strategic Focus in Review2021: The Path Forward

2019 was a year primarily focused on 4 operational priorities:

The global COVID-19 pandemic and associated public health restrictions caused major disruption to the Company’s lead priority was the STEP-1 (SingleTherapyEuglycemicProcedure) pivotal trial. The year was spent focusing on final training of clinical sites, study committee selection and running the STEP-1 Investigator Meeting. Additional focus was on selection, design, testing and deployment of multiple clinical trial management systems. Finally, the focus of efforts shifted to site initiations and initiation of patient recruitment efforts. The Company announced that the first patient was randomizedoperations, specifically in the STEP-1clinical hold on elective procedures pausing the Step-1 clinical trial in January 2020. Management expects that enrollment of Stage 1 (~67 patients; 50 EndoBarrier, ~17 control) will be enrolled by end of year 2020.

The Company, in concert with Apollo Sugar, has focused on preparation for initiation of the I-STEP (IndiaSingleTherapyEuglycemicProcedure) pivotal trial. The year was spent working with Apollo and CDSCO (Central Drugs Standard Control) and DCGI (Drugs Controller General of India) to receive approval to commence enrollment in the I-STEP study. In addition,United States, the Company focused on conducting clinical site qualifications, software selectionCOVID-19 related delay in receiving approval to initiate the I-Step trial in India, the COVID-19 related changes in the schedule and designpriorities of critical vendors in the application and integrationreview for CE Mark. With the majority of 2020 being disrupted due to the Apollo Sugar patient management app. Management expectsongoing COVID-19 pandemic, our strategic goals for 2021 involve the resumption of the pursuit of our corporate strategy with an aggressive focus on time compression of key activities to begin enrollment in Q3 2020 and to be completely enrolled within 9 months, currently projected to be completely enrolled by the endmake up for COVID-19 related delays. The complete resumption of Q1 2021.

The Company is working with its new notified body towards receiving CE Mark designation. The Company previously announced that it was working with Intertek as its notified body. The Company terminated that relationship and has been working with a different notified body whichactivity will be announceddependent on both a release of the restrictions that impacted operations in 2020, when the relationship is formalized under contract. Management is seeking CE Mark approvalbut also a processing of prioritized backlogs by the end of 2020; however, there is no assurance that CE Mark approval will be granted in the time frame anticipated by management or granted at any time in the future.

Finally, the Company focused on raising capital to adequately finance operations. Through a series of financings, management has been able to focus on reducing cash burn while decreasing risk, continuing to develop the Company’s intellectual property,critical agencies and continuing to support the release of statistically significant clinical data from independent investigator-initiated trials and two registries.

GI Dynamics hired key staff and moved to a new office location in Boston, Massachusetts in 2019.

Strategic Focus in 2020: The Path Forwardvendors.

The Company’s goal is to become the leading provider of alternative options for treating type 2 diabetes and concurrently reducing obesity. GI Dynamics intends to do this by conducting the following activities:

The Company will need to raise additional capital in 2020.2021.

As of December 31, 2019,2020, the Company’s primary source of liquidity is its cash cash equivalents and restricted cash balances. GI Dynamics is currently focused primarily on itsobtaining an EndoBarrier CE mark and enrolling the Company’s clinical trials, which will support future regulatory submissions and potential commercialization activities. Until GI Dynamicsthe Company is successful in gaining regulatory approvals, the Companyit is unable to sell itsthe Company’s product in any market at this time. Without revenues, GI Dynamics is reliant on funding obtained from investment in the Company to maintain business operations until the Company can generate positive cash flows from operations. The Company cannot predict the extent of its future operating losses and accumulated deficit, and it may never generate sufficient revenues to achieve or sustain profitability.

The Company has incurred operating losses since inception and at December 31, 2019,2020 and had an accumulated deficit of approximately $284 million and a working capital deficit of $3.4$296 million. The Company expects to incur significant operating losses for the next several years. At December 31, 2019,2020, the Company had approximately $2.5$1.2 million in cash cash equivalents and restricted cash.

The Company will need to restructure the terms of the 2017 Notearrange additional financing before March 31, 2020 and raise additional capital before MayAugust 1, 20202021 in order to continue to pursue its current business objectives as planned and to continue to fund its operations. The Company and Crystal Amber are currently in final discussions regarding the 2017 Note maturity extension. The Company is looking to raise additional funds through any combination of additional equity and debt financings or from other sources. However,sources, however, the Company has no guarantee that the 2017 Note will not mature on March 31, 2020 and has no guaranteed source of capital that will accommodate repayment of the 2017 Note and sustain operations past March 31, 2020. If the 2017 Note terms are restructured, the Company anticipates operating cash being exhausted by MayAugust 1, 2020 and therefore requires additional financing.2021. There can be no assurance that any such potential financing opportunities will be available on acceptable terms, if at all. If the Company is unable to raise sufficient capital on the Company’s required timelines and on acceptable terms to stockholders and the Board of Directors, it could be forced to cease operations, including activities essential to support regulatory applications to commercialize EndoBarrier. If access to capital is not achieved in the near term, it will materially harm the Company’s business, financial condition and results of operations to the extent that the Company may be required to cease operations altogether, file for bankruptcy, or undertake any combination of the foregoing. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statementsConsolidated Financial Statements are issued.

In addition, if the Company does not meet its payment obligations to third parties as they become due, the Company may be subject to litigation claims and its credit worthiness would be adversely affected. Even if the Company is successful in defending these claims, litigation could result in substantial costs and would be a distraction to management and may have other unfavorable results that could further adversely impact the Company’s financial condition.

As a result of the factors described above, the Company’s consolidated financial statementsConsolidated Financial Statements include a going-concern disclosure. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further information regarding the Company’s funding requirements.

Implications of Being a Smaller Reporting Company

Section Rule 12b-2 of the Securities Exchange Act of 1934, as amended, (“the Exchange Act”), establishes a class of company calledWe are a “smaller reporting company,” which effective September 10, 2018, was amended to includecompany” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies with a public float of less than $250 million as of the last business day of its most recently completed fiscal quarter or, if such public float is less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available. For the year ended December 31, 2019, the Company qualifies as a smaller reporting company.

As a smaller reporting company, the Company may take advantage of specified reduced disclosure and other requirements that are otherwise generally applicable to public companies that do not qualify for this classification. The provisions include:

For as long as GI Dynamics continues to be a smaller reporting company, the Company expects that it will take advantage of thecertain reduced disclosure obligations, available to it as a resultincluding, among other things, providing only two years of such classification. The Companyaudited financial statements. We will remain a smaller reporting company until it has a public floatthe last day of $250any fiscal year for so long as either (1) the market value of our shares of common stock held by non-affiliates does not equal or exceed $250.0 million or more as of the last business day of its most recentlyprior June 30th, or (2) our annual revenues did not equal or exceed $100.0 million during such completed fiscal quarter,year and the Company could retain its smaller reporting company status indefinitely depending onmarket value of our shares of common stock held by non-affiliates did not equal or exceed $700.0 million as of the sizeprior June 30th. To the extent we take advantage of itsany reduced disclosure obligations, it may make comparison of our financial statements with other public float.companies difficult or impossible.

Employees

As ofAt March 12, 2020,11, 2021, GI Dynamics has 1512 full-time employees, 129 of whom are in the United States. None of the Company employees are represented by labor unions or covered by collective bargaining agreements.

Available Information

Financial and other information about GI Dynamics is available on the Company website, whose address is www.gidynamics.com. The Company makes available on its website, free of charge, copies of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the U.S. Securities and Exchange Commission (SEC) and the Australian Securities Exchange (ASX). The.The information contained in the Company website is not intended to be part of this filing.

Item 1A. RISK FACTORS

The Company’s business faces many risks. The Company believes the risks described below are the material risks that it faces. However, the risks described below may not be the only risks that it faces. Additional unknown risks or risks that are currently considered immaterial, may also impair the Company’s business operations. If any of the events or circumstances described below actually occur, the Company’s business, financial condition or results of operations could suffer, and the trading price of its CDIs could decline significantly.suffer. You should consider the specific risk factors discussed below together with the cautionary statements under the caption “Forward-Looking Statements” and the other information and documents that the Company files from time to time with the Securities and Exchange Commission (SEC) and the Australian Securities Exchange (ASX).

Risks Related to the Company’s Business

GI Dynamics will need substantial additional funding and may be unable to raise capital when needed, which could force the Company to delay, reduce, or eliminate planned activities or result in its inability to operate as a going concern.

As of December 31, 2019,2020, the Company’s primary source of liquidity is its cash cash equivalents and restricted cash balances. GI Dynamics is currently focused primarily on itsobtaining an EndoBarrier CE mark and enrolling the Company’s clinical trials, which will support future regulatory submissions and potential commercialization activities. Until the Company is successful in gaining regulatory approvals, it is unable to sell the Company’s product in any market at this time. Without revenues, GI Dynamics is reliant on funding obtained from investment in the Company to maintain business operations until the Company can generate positive cash flows from operations. The Company cannot predict the extent of future operating losses and accumulated deficit, and it may never generate sufficient revenues to achieve or sustain profitability.

The Company has incurred operating losses since inception and at December 31, 2019,2020 and had an accumulated deficit of approximately $284 million and a working capital deficit of $3.4$296 million. The Company expects to incur significant operating losses for the next several years. At December 31, 2019,2020, the Company had approximately $2.5$1.2 million in cash cash equivalents and restricted cash.

The Company will need to restructure the terms of the 2017 Notearrange additional financing before March 31, 2020 and raise additional capital before MayAugust 1, 20202021 in order to continue to pursue its current business objectives as planned and to continue to fund its operations. The Company and Crystal Amber are currently in final discussions regarding the 2017 Note maturity extension. The Company is looking to raise additional funds through any combination of additional equity and debt financings or from other sources. However,sources, however, the Company has no guarantee that the 2017 Note will not mature on March 31, 2020 and has no guaranteed source of capital that will accommodate repayment of the 2017 Note and sustain operations past March 31, 2020. If the 2017 Note terms are restructured, the Company anticipates operating cash being exhausted by MayAugust 1, 2020 and therefore requires additional financing.2021. There can be no assurance that any such potential financing opportunities will be available on acceptable terms, if at all. If the Company is unable to raise sufficient capital on the Company’s required timelines and on acceptable terms to stockholders and the Board of Directors, it could be forced to cease operations, including activities essential to support regulatory applications to commercialize EndoBarrier. If access to capital is not achieved in the near term, it will materially harm the Company’s business, financial condition and results of operations to the extent that the Company may be required to cease operations altogether, file for bankruptcy, or undertake any combination of the foregoing. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statementsConsolidated Financial Statements are issued.

In addition, if the Company does not meet its payment obligations to third parties as they become due, the Company may be subject to litigation claims and its credit worthiness would be adversely affected. Even if the Company is successful in defending these claims, litigation could result in substantial costs and would be a distraction to management and may have other unfavorable results that could further adversely impact the Company’s financial condition.

As a result of the factors described above, the Company’s consolidated financial statementsConsolidated Financial Statements include a going-concern disclosure.

The terms See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for further information regarding the Company’s indebtedness, in particular the terms of the 2017 Note, may result in the liquidation or winding down of the business, which would have a negative impact on holders of the Company CDIs and common stock.

In June 2017, GI Dynamics completed its 2017 Note secured financing with Crystal Amber for a gross amount of $5.0 million that accrues annually compounded interest of 5% per annum. In December 2018, the maturity date of the 2017 Note was extended from December 31, 2018 to March 31, 2019 in exchange for payment of approximately $394 thousand, which was the total accrued interest on the 2017 Note at December 31, 2018. In 2019, the maturity of the 2017 Note was extended multiple times, most recently to March 31, 2020.

As of March 12, 2020, the Company had outstanding debt obligations of $9.9 million, including accrued interest. Approximately $5.3 million of this amount is due and payable on or before March 31, 2020 under the terms of the 2017 Note, unless (i) the 2017 Note is converted to equity prior to March 31, 2020 or (ii) the 2017 Note is restructured to extend the maturity date, as was last done in August 2019. The Company’s debt obligations are secured by all of the Company’s assets such that upon an event of default, the Company may be forced to sell some or all of its assets in order to make payment against the debt obligation when due. The proceeds from the sale of all of the Company’s assets may be insufficient to satisfy its debt obligations in full. As a result, it is unlikely that any proceeds would be available for distribution to holders of the Company’s CDIs or common stock on a sale of the Company’s assets or on a liquidation or winding down of the business.funding requirements.

Failure to achieve a positive outcome in the U.S. clinical trial of EndoBarrier could negatively impact the Company’s ability to raise additional capital and obtain regulatory approval in other countries.

GI Dynamics is conducting the U.S. pivotal trial of EndoBarrier under the FDA’s IDE. The Company refers to this trial as the GI Dynamics STEP-1 clinical trial in its statements and filings. Failure to achieve a positive outcome in this clinical trial could result in the failure of EndoBarrier to gain regulatory approval in the U. S. This outcome could negatively impact the Company’s ability to raise additional capital and obtain regulatory approval in other countries.

In order to complete the STEP-1 clinical trial, GI Dynamics will need to enroll patients that ultimately complete the trial protocol. If the Company is unable to enroll patients, if the enrollment pace is slower than anticipated, or if a number of enrolled patients do not complete the study protocol, it could have a negative effect on the Company’s ability to complete the clinical trial, which could adversely affect the Company’s business, operating results and prospects.

Conducting successful clinical studies will require the enrollment of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the sufficient resolution of COVID-19 related public health restrictions to allow enrollment and implantation of patients, the sufficient decline in the perception of risk of infection with SARS-CoV2, or emerging or new variants, related to physical presence in a clinical setting, the size of the target patient population, the nature of the trial protocol, the desirability of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigators and support staff, the proximity of patients to clinical sites, the ability of patients to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in the Company’s clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of the Company’s product or if they determine that the treatments received under the trial protocols are not desirable or involve unacceptable risk or discomfort.

Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required and GI Dynamics may not adequately develop such protocols to support clearance or approval. Further, the FDA may require the Company to submit data on a greater number of patients than originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to the Company’s clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval or clearance and attempted commercialization of the Company’s product or result in the failure of the clinical trial. In addition, despite considerable time and expense invested in clinical trials, the FDA may not consider the Company’s data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect the Company’s business, operating results and prospects.

GI Dynamics or third parties upon whom it depends may be adversely affected by natural disasters and/or health epidemics (specifically, COVID-19), and the Company’s business, financial condition and results of operations could continue to be adversely affected.

Natural disasters and/or health epidemics could severely disrupt the Company’s operations and have a material adverse effect on the Company’s business operations. If a natural disaster, health epidemic, or other event beyond the Company’s control occurred that prevented the Company or third parties on which GI Dynamics relies from using appropriate office, manufacturing, or warehouse space, that damaged critical infrastructure, negatively impacted the manufacturing capabilities of the Company’s third-party contract manufacturers, disabled broadband systems such that communication and access to records was impaired, or that otherwise disrupted operations, it may be difficult for GI Dynamics to continue its business for a substantial period of time. In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. In January 2020, this coronavirus spread to other parts of the world, including the United States and Europe, and efforts to contain the spread of this coronavirus intensified. In March 2020, the World Health Organization declared the Coronavirus outbreak a “pandemic.” The extentCompany operations experienced significant restrictions and delays in 2020, including the following operational impacts:

As of March 2021, various vaccines are being administered at differential rates in global communities and while the spread of SARS-CoV-2 is being impacted positively, a state of global economic and public health safety uncertainty remains as SARS-CoV-2 variants have emerged. Currently, the existing vaccines provide protection against the known variants, but the emergence of a variant for which the coronavirus impactscurrent vaccines are not effective may occur. If such a variant does emerge, the Company’s results will depend on future developments, whichsame effects experienced in 2020 may be repeated as restrictions are highly uncertain and cannot be predicted, including new information which may emerge concerningagain required to minimize the severityimpact of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.re-emergent pandemic.

Should the coronavirus continue to spread in the United States and Europe or should a novel strain develop for which there is no vaccine or effective treatments, GI Dynamics business operations couldwill likely continue to be delayed or interrupted. For instance, the Company’s clinical trials may be impacted by containment policies enacted by the clinical practice, the respective state or the Federal government. ThisFurther, as a result of 2020 restrictions, there is a growing backlog of patient procedures which may be prioritized higher than EndoBarrier implantation. These, and other COVID-19 related effects could result in lower than anticipated patient registration or enrollment and GI Dynamics may be forced to temporarily delay or pause ongoing trials. Further, if the spread of the coronavirus continues and the Company’s operations are impacted, GI Dynamics risks a delay, default and/or nonperformance under existing agreements arising from force majeure. If any of the foregoing were to occur, it could materially adversely affect the Company’s financial condition.

The FDA has mandated certain stopping rules in the STEP-1 clinical trial. If the stopping rules are triggered or other unanticipated adverse issues occur during the STEP-1 clinical trial, the FDA may not permit the trial to continue. If that were to happen, the Company’s business, operating results and prospects would be materially and adversely affected.

Clinical trials involve the administration of the biological product candidate to patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. In the context of the GI Dynamics STEP-1 clinical trial, hepatic bleeding is an example of an adverse event that would be investigated and could trigger such stopping rules.

If, during the STEP-1 clinical trial, the stopping rules are triggered or other unanticipated adverse issues occur, the FDA may prevent the Company from enrolling additional patients in the clinical trial or may not permit the clinical trial to be completed. If that were to happen, the Company’s business, operating results and prospects would be materially and adversely affected.

In order to commercialize the Company’s product in the U.S. and certain other countries, GI Dynamics will need to obtain regulatory and other approvals. The Company’s inability to achieve, or a delay in achieving, such approvals could lead to the denial of marketing approval for EndoBarrier® or any of its other products.

At present, GI Dynamics has no regulatory approvals for the marketing and sale of EndoBarrier. In November 2017, the Company received notification from SGS, the Company’s now former notified body in Europe, that they were withdrawing the Certificate of Conformity for EndoBarrier. The Certificate of Conformity is required for the sale of any product under CE marking. As a result, GI Dynamics is not permitted to supply the EndoBarrier, EndoBarrier Delivery System and EndoBarrier Retrieval System in Europe.

There is no guarantee that GI Dynamics will obtain additional approvals from regulatory bodies in the future, including the FDA in the U.S. In the U.S., the Company stopped its pivotal trial of EndoBarrier in 2015. The Company will not be able to obtain FDA approval to commercialize EndoBarrier in the U.S. until the STEP-1 clinical trial is successfully completed and regulatory approval is obtained from the FDA through the PMA review process. The STEP-1 clinical trial will be conducted in two stages. At the end of the first stage, the FDA will review data collected to date from the STEP-1 clinical trial and must approve the continuation of the STEP-1 clinical trial to the second stage. There can be no assurance that the FDA will approve continuation of the trial at the end of the first stage.

Regulatory authorities in other countries may also require additional clinical trials. Any such clinical trials may be delayed, suspended or prematurely terminated because costs are greater than anticipated or for a variety of other reasons, including: COVID-19 related delays, delay or failure in reaching agreement with the foreign regulatory authority(ies) on a trial design that the Company is able to execute; delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial; or regulators may require that the Company suspend or terminate its clinical trials for various reasons, including noncompliance with regulatory requirements, unforeseen safety issues or adverse side effects, or a finding that the participants are being exposed to unacceptable health risks. Any of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval for EndoBarrier or any of the Company’s other products. Necessary regulatory approvals could also be delayed, which could significantly impact the Company’s ability to commercialize the Company’s technology in the U.S. and other countries.

GI Dynamics has a history of net losses and may never achieve or maintain profitability.

GI Dynamics is a medical device company with a limited history of operations and has limited commercial experience with its product. As of December 31, 2019,2020, the Company’s primary source of liquidity is its cash cash equivalents and restricted cash balances. The Company continues to evaluate which markets are appropriate to continue pursuing reimbursement, market awareness and general market development and selling efforts, and continues to restructure its business and costs, establish new priorities, and evaluate strategic options. The Company expects to continue to incur significant operating losses for the foreseeable future as it incurs costs, including those associated with commercializing the Company’s products, conducting clinical trials to test its products, attempting to secure regulatory approvals for the Company’s products (in the U.S. and other countries) and increasedongoing costs associated with being a publican SEC reporting company in the U.S. As a result, if the Company remains in business, it expects to incur significant operating losses for the next several years.

The Company has incurred operating losses since inception and at December 31, 2019,2020, had an accumulated deficit of approximately $284 million and a working capital deficit of $3.4$296 million. The Company expects to incur significant operating losses for the next several years. At December 31, 2019,2020, the Company had approximately $2.5$1.2 million in cash cash equivalents and restricted cash.

GI Dynamics cannot predict the extent of future operating losses and accumulated deficit, and it may never generate sufficient revenues to achieve or sustain profitability.

GI Dynamics depends heavily on the success of the Company’s product, EndoBarrier. The Company cannot give any assurance that EndoBarrier will receive regulatory approval, which is necessary before it can be commercialized.

The Company’s ability to generate product revenues will depend heavily on the successful commercialization of its product, EndoBarrier, if approved by regulatory agencies in the U.S. or abroad. GI Dynamics cannot be certain that EndoBarrier will be successful in clinical trials or receive regulatory approval. Further, EndoBarrier may not receive regulatory approval even if it is successful in clinical trials. If the Company does not receive regulatory approvals for EndoBarrier, it may not be able to continue operations.

If GI Dynamics can obtain the required regulatory approvals in the U.S. and certain other countries, it expects to derive substantially all of its revenue from sales of EndoBarrier. Accordingly, the Company’s ability to generate revenues in the future relies on its ability to market and sell this product.

The degree of market acceptance for EndoBarrier will depend on a number of factors, including:

GI Dynamics cannot predict the outcome and timing of its current and future human clinical trials of EndoBarrier products. If the trials do not produce positive results, the commercial prospects for EndoBarrier will be impaired.

The results of current and future human clinical trials, whether investigator initiated, or Company sponsored, cannot be predicted. If EndoBarrier or new products that the Company develops and tests in the future cause serious adverse events in future human clinical trials, these trials may need to be delayed or stopped. For example, GI Dynamics stopped its original U.S. pivotal trial, the ENDO trial, in 2015 because of adverse events associated with EndoBarrier in that trial. In addition, these clinical trials may not produce positive safety or efficacy results or may produce results that are not as favorable as those seen in previous clinical trials.

Negative safety or efficacy results of any future human clinical trials could require that the Company attempt to modify the EndoBarrier device or the treatment guidelines to address these issues and there is no guarantee that any potential modifications would be successfully developed.

If future human clinical trials of EndoBarrier products do not meet the required clinical specifications or cause serious adverse or unexpected events, such as those experienced in the ENDO trial, then these results could affect regulatory approvals and adoption and materially impact potential product sales and reimbursement. If the Company is not able to adequately address any adverse or unexpected events through training, education, changes in product design or product claims, this may significantly impair the commercial prospects for EndoBarrier.

Doctors may not accept EndoBarrier as a treatment option, which would harm the Company’s business and future revenues, if any.

The commercial success of EndoBarrier will require acceptance by physicians, who may be slow to adopt the Company’s product for the following reasons (among others):

Although the Company has developed relationships with physicians who are key opinion leaders in certain countries, GI Dynamics cannot assure that these existing relationships and arrangements can be maintained or that new relationships will be established in support of its products. If physicians do not consider the Company’s products to be adequate for the treatment of type 2 diabetes or if a sufficient number of physicians recommend and use competing products or pharmacotherapies, it could harm the Company’s business and future revenues, if any.

The Company has limited sales, marketing and distribution experience; therefore, it may be unable to successfully commercialize its products.

There can be no guarantee that the Company will be able to effectively commercialize its products. Developing direct sales, distribution and marketing capabilities will require the devotion of significant resources and require GI Dynamics to ensure compliance with all legal and regulatory requirements for sales, marketing and distribution. Failure to develop these capabilities and meet these requirements could jeopardize the Company’s ability to market its products or could subject it to substantial liability. In addition, for those countries where the Company commercializes its products through distributors or other third parties, GI Dynamics will rely heavily on the ability of its partners to effectively market and sell its products to physicians and other end users in those countries. The Company cannot guarantee that distributors or other third parties will be effective in commercializing GI Dynamics products.

GI Dynamics may compete against companies that have longer operating histories, more established or approved products, and greater resources, which may prevent the Company from achieving market penetration with its products.

Competition in the medical device industry is intense and EndoBarrier will likely compete in part against more established procedures and products for the treatment of type 2 diabetes and obesity. Bariatric surgery, including gastric bypass surgery and the gastric band, have been used for many years with extensive publication histories on clinical effectiveness. Large multinational medical device companies sell supplies for these procedures and are formidable competitors to new entrants. In addition, certain drugs have been approved, and are used, for the treatment of type 2 diabetes and obesity. Pharmaceutical companies with significantly greater resources than the Company market these drugs, and GI Dynamics may be unable to compete effectively against these companies.

Many of the Company’s competitors have significantly greater sales, marketing, financial and manufacturing capabilities than it has and have established reputations and/or significantly greater name recognition. Accordingly, there is no assurance that GI Dynamics will be able to win market share from these competitors or that these competitors will not succeed in developing products that are more effective or economic.

Additionally, GI Dynamics is likely to compete with companies offering new technologies in the future. The Company may also face competition from other medical therapies, which may focus on the Company’s target market as well as competition from manufacturers of pharmaceutical and other devices that have not yet been developed. Competition from these companies could adversely affect the Company’s business.

GI Dynamics does not have data regarding the long-term benefits of EndoBarrier, which may affect market acceptance. Furthermore, if the long-term data, once obtained, does not indicate that EndoBarrier is as safe or effective as other treatment options, the Company’s business would be harmed.

An important factor that may be relevant to market acceptance of EndoBarrier is whether it improves or maintains glycemic control and maintains weight loss over extended periods of time after removal of the device. While the Company has tested and evaluated its technology in several clinical trials with hundreds of patients which, in the aggregate, have shown that EndoBarrier is an effective treatment for type 2 diabetes and also reduces obesity, GI Dynamics does not yet have sufficient data to demonstrate and claim any longer-term benefits of its product in the treatment of type 2 diabetes and the reduction of obesity following removal of the device from the patient.

GI Dynamics is continuing to monitor some patients who participated in the Company’s clinical trials after device removal to determine the ongoing effects and longevity of results, however, the Company does not currently have long-term data that supports the safety and efficacy of EndoBarrier. Accordingly, the Company cannot provide assurance that the long-term data, once obtained, will prove lower HbA1c levels compared to alternative treatment options for type 2 diabetes. If the results obtained from the Company clinical trials indicate that EndoBarrier is not as safe or effective as other treatment options or as effective as the Company’s current short-term data would suggest, EndoBarrier may not be approved, or its adoption may suffer, and the Company’s business would be harmed.

If GI Dynamics fails to obtain and maintain adequate levels of reimbursement for its products by health insurers and other third-party payers, there may be no commercially viable markets for its products, or the markets may be much smaller than expected.

If GI Dynamics products are approved for sale, health care providers, including hospitals and physicians that may purchase the Company’s products, generally rely on third-party payers, particularly government-sponsored health care and private health insurance providers, to pay for all or a portion of the costs of the procedures, including the cost of the products used in such procedures. Reimbursement and health care payment systems vary significantly by country. Third-party payers may attempt to limit coverage and the level of reimbursement of new therapeutic products.

If GI Dynamics fails to obtain and maintain adequate levels of reimbursement for its products by health insurers and other third-party payers, there may be few commercially viable markets for its products, or the markets may be much smaller than expected. Third-party payers may demand additional clinical data requiring new clinical trials or economic models showing the cost savings of using the Company’s product, each of which would consume resources and may delay the decision on reimbursement. If the results of such studies are not satisfactory to third-party payers, then reimbursement may not be received in an acceptable amount or at all. In addition, the efficacy, safety, performance and cost-effectiveness of the Company’s products in comparison to any competing products or therapies may determine the availability and level of reimbursement.

The Company believes that future reimbursement may be subject to increased restrictions both in the U.S. and in international markets. Future legislation, regulation or reimbursement policies of health insurers or third-party payers may adversely affect the demand for the Company’s current and future products or limit the Company’s ability to sell these products on a profitable basis.

The Company’s products may be subject to extensive, dynamic and ongoing regulation in countries where it plans to sell EndoBarrier, which may impede or hinder the approval or sale of its products and, in some cases, may ultimately result in the inability to obtain approval of certain products or may result in the recall or seizure of previously approved products.

The medical device industry is regulated extensively by governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies and authorities, such as the E.U., legislative bodies and the European Economic Area, or EEA, Member State Competent Authorities. Additionally, the exit of Great Britain from the E.U. may create a separate and distinct regulatory agency with different requirements for regulatory approval in Great Britain.

Before GI Dynamics can market its products in the E.U., and in many other parts of the world, it must obtain and maintain CE Mark certification, which indicates that a product meets the essential requirements of applicable E.U. Directives and has been subject to the appropriate conformity assessment route. This conformity assessment procedure is often done through a self-certification, but depending on the type of product, may also require verification by an independent certification body, called a “notified body.” Notified bodies will also periodically conduct audits to ensure continued compliance with the applicable requirements. The CE Mark allows free movement of products in the E.U., the EEA and Switzerland although any of the member countries may require medical devices to be registered and impose requirements relating to the language of the device information. Many non-European countries also recognize and accept the CE Mark. Failure to support product performance claims and demonstrate continued compliance with the applicable E.U. requirements, can result in the loss of the right to affix the CE Mark to the product, which prevents the product from being sold within the territory and in other countries that recognize the CE Mark.

Before GI Dynamics can market its products in other parts of the world, which are not regulated via CE mark or FDA approvals, it must obtain and maintain regulatory approvals in those countries. These approvals are dependent on clinical data and may require specific clinical trial data to be collected before applications for approval can be made. The Company does not currently have any assurance in any jurisdiction that such regulatory approvals will be granted or that more extensive clinical trials will not be required to secure such approvals. In India, GI Dynamics is partnering with Apollo Sugar to initiate and conduct clinical trials to generate data required by the Indian regulatory authorities, but as with any market, the Company does not have any assurance that these trials will generate the complete data set required to support a marketing approval.

In addition, even if the Company receives regulatory approval of its products in existing markets, the Company will be subject to ongoing regulatory requirements relating to its existing products in those markets. These include the requirement to timely file various reports with regulatory authorities in the countries in which the Company markets products, including reports of adverse events such as those experienced in the ENDO trial, events that may have caused or contributed to a death or serious injury and malfunctions that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not timely filed, regulators may impose sanctions, including temporarily suspending existing market authorizations, and sales of EndoBarrier may suffer. In that case, the Company may be subject to product liability or regulatory enforcement actions, all of which could harm the Company’s business. The Company’s failure to comply with EEA or other foreign regulations applicable in the countries where it operates could lead to the issuance of warning letters or untitled letters, the imposition of injunctions, suspensions or loss of regulatory clearance or approvals, product recalls, termination of distribution, product seizures or civil penalties. In the most extreme cases, criminal sanctions or closure of the Company’s manufacturing facilities are possible.

In addition, numerous new regulatory changes in the E.U. came into effect in 2016. The Company may not be able to comply with the new regulations and standards, despite compliance with prior regulations and standards.

In some countries, GI Dynamics may rely on its foreign distributors and agents to assist in complying with foreign regulatory requirements, and the Company cannot be sure that they will always do so. If the Company or any of its suppliers, third-party manufacturers, distributors, agents or customers fail to comply with applicable requirements, the Company may face:

Regulatory requirements affecting the development, manufacture and sale of medical devices are evolving and subject to future change. GI Dynamics cannot predict what impact, if any, those changes might have on its business. Failure to comply with regulatory requirements could have a material adverse effect on the Company’s business, financial condition and results of operations. Later discovery of previously unknown problems with a product or manufacturer could result in fines, delays or suspensions of regulatory approvals. The failure to receive product approval on a timely basis, or the withdrawal of product approval by regulatory agencies, could have a material adverse effect on the Company’s business, financial condition or results of operations.

GI Dynamics has had historical challenges with regulatory compliance, which led to a 2014 shipping hold in the E.U., multiple observations by the Therapeutic Goods Administration (“TGA”) in Australia regarding the Company’s failure to comply with Essential Principals of the TGA, and compliance issues that led to the TGA’s cancellation of the EndoBarrier listing on the Australian Register of Therapeutic Goods (“ARTG”) in 2016. In addition, in May 2017, GI Dynamics received notification from its notified body, SGS, that the CE Mark for EndoBarrier had been suspended pending closure of non-conformances related to the Company’s quality management system required under International Organization for Standardization (“ISO”) regulations. On November 10, 2017, the Company received notification from SGS that SGS was withdrawing the Certificate of Conformance for EndoBarrier, ending the CE Marking of EndoBarrier in Europe and select Middle East countries.

Given the past challenges the Company has had in meeting all the requirements of a comprehensive global quality system, a risk exists that the Company will have compliance issues in the future.

Claims that the Company’s current or future products infringe or misappropriate the proprietary rights of others could adversely affect the Company’s ability to sell those products and cause it to incur additional costs.

If any third-party intellectual property claim against the Company is successful, the Company could be prevented from commercializing EndoBarrier or other Company products.

There are numerous issued patents and pending patent applications in the U.S. and internationally that are owned by third parties and that contain patent claims in areas that are the focus of the Company’s product development efforts. GI Dynamics is aware of patents owned by third parties, to which it does not have licenses, that relate to, among other things, liner materials and anchoring. The Company has also employed individuals who were previously employed at other medical device companies, including competitors or potential competitors, which may result in claims from third parties that the Company has inadvertently or otherwise used or disclosed alleged trade secrets or other proprietary information of former employers of its employees.

In addition, because patent applications can take many years to issue, there may be currently pending applications, unknown to the Company, which may later result in issued patents that pose a material risk to the Company.

GI Dynamics expects that it could be subject to third-party infringement claims if the number of competitors grows and the functionality of products and technology in different industry segments overlap. Third parties may currently have, or may eventually be issued, patents on which its current or future technologies may infringe.

If GI Dynamics is unable to obtain, maintain and enforce intellectual property protection covering its products, others may be able to make, use, or sell products substantially the same as the Company’s, which could adversely affect the Company’s ability to compete in the market.

The Company’s commercial success is dependent in part on obtaining, maintaining and enforcing intellectual property rights, including patents, covering EndoBarrier and the Company’s future products. If GI Dynamics is unable to obtain, maintain and enforce intellectual property protection covering its products, others may be able to make, use or sell products that are substantially the same as the Company’s without incurring the sizeable development costs that the Company has incurred, which would adversely affect the Company’s ability to compete in the market. Certain patents covering EndoBarrier will begin to expire in 2023.

Even if GI Dynamics patents are determined by a court to be valid and enforceable, they may not be sufficiently broad or enforceable to prevent others from marketing products similar to the Company’s or designing around the Company’s patents, despite its patent rights. GI Dynamics products may also not have freedom to operate unimpeded by the patent rights of others.

In addition to patented technology, the Company relies on a combination of non-patented proprietary technology, trade secrets, processes, procedures, technical knowledge and know-how accumulated or acquired since inception. Any of the Company’s intellectual property rights could be challenged, invalidated, circumvented or misappropriated. In order to preserve and enforce the Company’s patent and other intellectual property rights, GI Dynamics may need to make claims or file lawsuits against third parties. This can entail significant costs and divert management’s attention from developing and commercializing EndoBarrier.

GI Dynamics relies on suppliers for certain key components in the manufacture of the EndoBarrier system. If these suppliers were to become unavailable to the Company, there could be delays in the commercialization of the Company’s products.

GI Dynamics relies on suppliers for several key components of EndoBarrier, in particular the material used to manufacture the sleeve used in EndoBarrier. Except as discussed below, the Company or its manufacturing partner, PPMD, have supply agreements in place with suppliers of all components and services required to manufacture the EndoBarrier System. While GI Dynamics currently has adequate material required to make the sleeve to support the Company well into commercialization efforts, the Company does not presently have an active supply agreement with a manufacturer for additional material. The reliance on third-party suppliers subjects the Company to risks that could harm its business, particularly with respect to the supply of key components or processes. Although the Company believes that alternative suppliers are available, the process of identifying and qualifying new suppliers who can produce the components to the Company’s specifications could cause delays in the commercialization of the Company products.

The use, misuse or off-label use of the Company’s products by physicians may harm the Company’s image in the marketplace or result in injuries that lead to product liability.

GI Dynamics cannot prevent a physician from using EndoBarrier for purposes outside of its eventual approved and intended use, which is known as off-label use. If physicians attempt to use the Company’s products off-label, there may be an increased risk of adverse events. Further, the use of the Company’s products for uses other than those uses for which the products have been approved may not effectively treat such conditions, which could harm the Company’s reputation in the marketplace among physicians and patients.

Physicians may also misuse the Company’s products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability for the Company. Physicians may also treat patients from other countries where the product is not approved, and the physician is then unable to properly monitor the patient’s progress. If GI Dynamics is deemed to have engaged in the promotion of any of its products for off-label use, the Company could be subject to action by regulatory authorities and the imposition of sanctions, which could also affect the Company’s reputation and position within the industry.

Patients may not follow instructions from their physicians. Patients who ignore training and ignore their clinician’s request to comply with dietary instructions or pharmacotherapy label instructions, or to remove EndoBarrier at the end of the 12-month indication for treatment may be exposed to greater physical and clinical risk.

Product liability claims could damage the Company’s reputation or adversely affect its business or financial position.

GI Dynamics may be exposed to the risk of product liability claims, which are inherent in the design, manufacturing, marketing and use of medical devices and, in particular, implantable medical devices. The Company holds product liability insurance; however, adequate product liability insurance may not continue to be available on commercially acceptable terms. Product liability claims may damage the Company’s reputation and, if the Company’s insurance coverage proves inadequate, may harm or destroy the Company’s business. Defending a suit, regardless of its merits, could be costly and could divert Company management’s attention from the Company’s core business activities.

GI Dynamics will rely on a third-party manufacturer for its products and this manufacturer is required to comply with regulatory requirements. Failure of the Company’s manufacturer or suppliers to comply with regulatory requirements could disrupt the manufacturing process, which would, in turn, have a material adverse effect on the Company’s business and results of operations.

Future clinical trials and commercialization of GI Dynamics products requires access to manufacturing facilities that meet applicable regulatory standards to manufacture a sufficient supply of the Company’s products. GI Dynamics will rely on a third-party manufacturer to meet the applicable regulatory requirements. Suppliers of components and products used to manufacture the Company’s products and the Company’s third-party manufacturer must also comply with applicable regulatory requirements. These often require significant time, resources, record-keeping and quality assurance efforts and subject the Company, its suppliers and third-party manufacturer to potential regulatory inspections and stoppages. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored by regulatory authorities. Failure by GI Dynamics, its third-party manufacturer or suppliers to comply with regulatory requirements or failure to take satisfactory corrective action in response to an adverse inspection could result in enforcement actions that could have a material adverse effect on the Company’s business and results of operations.

In order to manufacture EndoBarrier in the quantities that GI Dynamics anticipates will be required to meet its clinical trial needs and potential future market demand, the Company will need to increase production capacity and efficiency over current levels, and the Company’s third-party manufacturer must therefore be able to provide the Company with sufficient quantities of its product in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable cost and on a timely basis. The Company’s potential future growth could strain the ability of its third-party manufacturer to deliver the Company’s product and obtain materials and components in sufficient quantities. Third-party manufacturers often experience difficulties in scaling up production, including problems with production yields and quality control and assurance. If the Company is unable to obtain a sufficient or consistent supply of EndoBarrier or any other product it is developing, or if it cannot do so efficiently, the Company’s revenue, business and financial prospects would be adversely affected.

The Company announced on July 26, 2017 that it executed an agreement with PPMD to manufacture the Company’s product. GI Dynamics does not have extensive experience with this manufacturer, and the Company cannot guarantee that PPMD will manufacture its product in a validated manner or to acceptable levels of quality. The Company is seeking other suppliers who will be able to manufacture the Company’s product should the relationship with PPMD not prove successful.

GI Dynamics has been focused on efficiently running the Company’s operations in order to conserve resources which may impact its ability to retain its remaining employees and therefore the Company may not be able to sustain its business.

As ofAt March 12,11, 2021, 2020, GI Dynamics has 1512 full time employees. Since the Company’s initial restructuring efforts in 2015, the Company has been heavily dependent upon its ability to retain its remaining employees. The loss of service of any of the Company’s remaining employees, particularly members of the management team, may have an adverse effect on the Company’s business. Given the long period of reduced staff, the morale of the Company’s remaining employees may be lower, employees may be distracted and any one of the remaining employees could terminate his or her employment with the Company at any time. A departing employee’s expertise would be difficult to replace and the failure to do so on a timely basis could have a material adverse effect on the Company’s ability to achieve its business goals. There can be no assurance that the Company will have the financial resources to, or otherwise be successful in, retaining the Company’s remaining personnel and failure to do so could have a material adverse effect on the Company’s business, financial condition and results of operations.

If GI Dynamics is unable to retain or hire key personnel, it may not be able to sustain or grow its business.

The Company’s ability to operate successfully and manage potential future growth depends significantly upon the ability to attract, retain and motivate highly skilled and qualified research, technical, clinical, regulatory, sales, marketing, managerial and financial personnel. The competition for qualified employees in the medical device industry is intense and there are a limited number of persons with the necessary skills and experience.

The Company’s performance is substantially dependent on senior management and key technical staff to continue to develop and manage the Company operations. The loss or the inability to recruit and retain high-caliber staff could have a material adverse effect on the Company. GI Dynamics also relies on the technical and management abilities of certain key directors, key members of the executive team and employees, consultants and scientific advisers. The loss of any of these directors, members of the executive team, employees, consultants, or scientific advisers could have an adverse effect on the Company’s business. On April 13, 2018 the Company terminated the employment of its Chief Compliance Officer and Vice President, Finance and Accounting for cost-management purposes. The Company hired a Chief Financial Officer in December 2018 and a Vice President of Clinical and Regulatory Affairs in January 2019.

GI Dynamics may be unable to effectively manage its anticipated growth.

To manage the Company’s anticipated growth and to commercialize its products, GI Dynamics will need to expand operations (research and development, product development, quality, regulatory, manufacturing, sales, marketing and administrative). This expansion will place a significant strain on management, infrastructure, and operational and financial resources, particularly in light of the restructuring undertaken inuncertainties related to operational execution and methods after the last few years.COVID-19 pandemic, for example, international business travel versus virtual presence. Specifically, the Company will need to manage relationships with various persons and entities participating in the Company’s clinical trials and quality systems, manufacturers, suppliers and other organizations, including various regulatory bodies in the U.S. and other jurisdictions. GI Dynamics may not be able to implement the required improvements in an efficient and timely manner and may discover deficiencies in existing systems and controls. The failure to accomplish any of these tasks could materially harm the Company’s business and its ability to commercialize EndoBarrier. As a result, the Company’s revenue, business and financial prospects would be adversely affected.

While GI Dynamics remains listed on the ASX, it will incur increased costs because the Company is a public company in the U.S. whose equity securities are listed on the ASX.

As of December 31, 2013, GI Dynamics became subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although the existing listing of the Company’s CDIs on the ASX requires the Company to file financial information and make certain other filings with the ASX, the Company’s status as a reporting company under the Exchange Act causes the Company to incur additional legal, accounting and other expenses, including costs related to compliance with the requirements of the Sarbanes-Oxley Act of 2002, insurance costs related to being an Exchange Act reporting company and other administrative costs. GI Dynamics also expects such rules and regulations may make it more difficult and more expensive for the Company to obtain director and officer liability insurance and the Company may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for the Company to attract and retain qualified individuals to serve on its Board of Directors or as executive officers. GI Dynamics cannot predict or estimate the amount of additional costs it may incur or the timing of such costs.

The Company’s shares of its common stock are publicly traded on the ASX in the form of CDIs. As a result, the Company must comply with the ASX Listing Rules. GI Dynamics has policies and procedures that the Company believes are designed to provide reasonable assurance of compliance with the ASX Listing Rules. If, however, the Company does not follow those procedures and policies, or they are not sufficient to prevent non-compliance, GI Dynamics could be subject to liability, fines and lawsuits. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. The Company intends to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding the Company’s efforts to comply with new laws, regulations and standards, it fails to comply, regulatory authorities may initiate legal proceedings against the Company and its business may be harmed.

If the Company fails to maintain proper and effective internal controls over financial reporting, its ability to produce accurate and timely financial statements could be impaired, which could harm the Company’s operating results, and investors could lose confidence in the Company’s financial reports, which could adversely affect the value of the Company’s CDIs and common stock.Company.

As a publican SEC reporting company in the U.S., GI Dynamics is required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, to furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting as of the end of the fiscal year. The controls and other procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files with the SEC is disclosed accurately and is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. The Company’s first report on compliance with Section 404 was furnished in connection with the GI Dynamics financial statements for the year ended December 31, 2014. As a former emerging growth company and a current smaller reporting company, the Company has been and currently is exempted from the requirement to include an external auditor opinion on the Company’s internal controls in its filings. GI Dynamics continues to update, document and evaluate its internal control over financial reporting to the requirements of Section 404.

In Item 9A of this report, the Company discloses that with respect to the standards of Section 404, the Company concluded that its internal control over financial reporting was effective as of December 31, 2019.2020. For additional information on this item, please see Item 9A. Controls and Procedures.

Although wethe Company concluded that ourits internal control over financial reporting was effective as of December 31, 2019,2020, the Company has identified and reported material weaknesses in prior periods, and the Company cannot be certain that its internal control practices will ensure that the Company will have or maintain adequate internal control over financial reporting in future periods. Any failure to have or to maintain such internal control could harm the Company’s operating results, and investors could lose confidence in the Company’s financial reports, which could adversely affect the value of the Company’s CDIs and common stock.Company. 

Fluctuations in foreign currency exchange rates could adversely affect the Company’s financial results.

In the past, when GI Dynamics sold EndoBarrier outside of the U.S., the Company’s activities produced revenues and GI Dynamics incurred expenses in a variety of different currencies, which exposed the Company to significant exchange rate risk. If GI Dynamics is successful in once again obtaining CE Mark designation or other foreign regulatory approvals that will allow it to sell EndoBarrier outside of the U.S., the Company will again be exposed to significant exchange rate risk. Additionally, expenses may be incurred in foreign currencies, subjecting the Company to exchange rate risk at the time of cash disbursement. Exchange rate risk may affect the Company’s financial performance and position. Furthermore, some of the Company’s funds may be held in euros, Australian dollars or other currencies, while the Company’s functional currency is U.S. dollars. GI Dynamics is not currently hedging against exchange rate fluctuations, and consequently will be at the risk of any adverse movement in the U.S. dollar exchange rate if the Company exchanges funds held in one currency into another currency.

The Company’s shares of common stock, in the form of CDIs, are listed on the ASX and priced in Australian dollars. However, the Company’s reporting currency is U.S. dollars. As a result, movements in foreign exchange rates may cause the price of the Company’s securities to fluctuate for reasons unrelated to the Company’s financial condition or performance and may result in a discrepancy between the actual results of operations and investors’ expectations of returns on the Company’s securities expressed in Australian dollars.

Risks Related to the Medical Device Industry

The medical device industry is subject to rapid technology change, which may result in obsolescence of the Company’s products.

The medical device industry is subject to rapid technology change. For the Company to remain competitive and to retain and build market share, it must continually develop new products as well as improve its existing ones. Accordingly, The Company must devote substantial resources to research, development and commercialization activities.

There can be no assurance that GI Dynamics will be successful in developing competitive new products and/or improving existing products so that such products remain competitive and avoid obsolescence. There can also be no assurance that any or all Company research and development projects for new products will demonstrate safety and efficacy and result in commercial products, or that if such products are successfully designed and launched, they will be profitable.

Health care reform legislation could adversely affect the Company’s future revenue and financial condition.

In recent years, there have been numerous initiatives by governments throughout the world for comprehensive reforms affecting the delivery of and payment for health care. GI Dynamics cannot predict the changes that will be made and the effect such changes will have on the use of EndoBarrier. Decisions to increase or decrease reimbursement or coverage for treatments for type 2 diabetes and/or obesity could have a material impact on the Company’s business and results of operations.

CE Mark designation requires ongoing compliance, reporting and testing requirements established by regulatory agencies. While the Company has adopted comprehensive compliance programs to attempt to comply with these regulations, it is possible that some of its business activities could be subject to challenge. Furthermore, the regulations may become more stringent in the future and historical data may or may not suffice in meeting the new regulations. If the Company’s past or present operations, or those of its former independent sales agents and distributors, are found to be in violation of any of such applicable governmental regulations, GI Dynamics may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from health care reimbursement, product recall, or retraction of approval to market the Company’s product.

New legislation in the U.S. has also been enacted that imposes additional reporting requirements and penalties on the medical device industry. While GI Dynamics has adopted comprehensive compliance programs to attempt to comply with these regulations, it is possible that some of the Company’s business activities could be subject to challenge under one or more of such laws. If the Company’s past or present operations, or those of its former independent sales agents and distributors, are found to be in violation of any of such laws or any other applicable governmental regulations, GI Dynamics may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from health care reimbursement, product recall, or retraction of approval to market the Company’s product.

Subsequent to future regulatory approvals for EndoBarrier, pricing pressures in the health care industry could lead to demands for price concessions, which could have an adverse effect on the Company’s business, financial condition or results of operations.

Due to the significant rise in health care costs over the past decade, numerous initiatives and reforms initiated by governments and third-party payers to curb these costs have resulted in difficulties in maintaining or raising the number and price of procedures. The increase in pricing pressure is driven by the competitive environment in the medical device industry as many larger companies cut prices as they struggle to retain market share.

The type 2 diabetes and obesity market has seen increasing resistance from payers regarding local and national reimbursement coverage. GI Dynamics expects that market demand, government regulation, third-party reimbursement policies and societal pressures could exert downward pressure on the prices of the Company’s products in the future after regulatory approval is granted and may adversely impact the Company’s business, financial condition or results of operations on a country by country basis.

Manufacturing facilities for medical devices must comply with applicable regulatory requirements.

Completion of the Company’s current and future clinical trials and commercialization of its products requires access to manufacturing facilities that meet applicable regulatory standards to manufacture an adequate supply of the Company’s products. The third-party manufacturer and suppliers of components and parts that the Company intends to use to manufacture its products must also comply with applicable regulatory requirements, which often require significant time, money, resources and record-keeping and quality assurance efforts and subject the Company, its third-party manufacturer and its suppliers to potential regulatory inspections and stoppages.

Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections by regulatory authorities. Failure by the Company, its third-party manufacturer or its suppliers to comply with regulatory requirements or failure to take satisfactory corrective action in response to an adverse inspection could result in enforcement actions, including a public warning letter, a shutdown of, or restrictions on, the Company’s ability to obtain sufficient quantities of its products, delays in approving or clearing a product, refusal to permit the import or export of its products or other enforcement action.

Critical elements of the manufacturing process may be found to be hazardous and alternative technologies may cost more and/or may be less effective.

Numerous materials are used in the process of manufacturing a patient-ready device. As chemical testing and empirical data collection continues, certain chemicals or processes may be declared hazardous and while suitable alternatives will be sought, there may be a period of short or no availability before a replacement chemical or process is adopted. For example, a widespread process used in medical device manufacture is the use of ethylene oxide (“EtO”) for low temperature gas sterilization. In early 2019, a large EtO sterilization plant was closed by state-level authorities over health concerns. The medical device industry, the contract manufacturing industry, state authorities, federal authorities, and scientists are seeking a suitable alternative. Until such a suitable replacement is found, there is a risk that there will be a shortage of sterilization options, which may require design changes, process changes or which may cause a delay in device production.

Inadequate funding or pandemic-related limitations for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent EndoBarrier from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of the Company’s business rely, which could negatively impact the Company’s business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which the Company’s operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and medical devices to be reviewed and/or approved by necessary government agencies, which would adversely affect the Company’s business. For example, over the last several years, including beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly affect the ability of the FDA to timely review and process the Company’s regulatory submissions, which could have a material adverse effect on the Company’s business. Further, in the Company’s operations as a public company, future government shutdowns could impact the ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.

Risks Related to GI Dynamics CDIs and common stock

There is no current trading market for GI Dynamics common stock in the U.S. and no such market may develop.

AlthoughSubsequent to the Company’s CDIs are currently listedremoval from the official list of the Australian Securities Exchange on the ASX in Australia,July 22, 2020, there is not anyno current trading market for the Company’s CDIs or the underlying shares of common stock in the U.S.securities. Should at some stage in the future, GI Dynamics submitssubmit a listing application with Nasdaq (or any other exchange) to list its common stock on the Nasdaq Capital Market (or any other exchange), Nasdaq may not approve the listing application. Even if Nasdaq (or such other exchange) approves the Company’s listing application, an active trading market for the Company’s common stock may never develop in the U.S. (or other relevant country) and stockholders may not be able to transfer or resell their common stock at its fair value, or at all.

GI Dynamics is eligible to be treated as an “Smaller Reporting Company” as defined in the amended regulation S-K, section 210, and the Company cannot be certain if the reduced disclosure requirements applicable to Smaller Reporting Companies will make its common stock and CDIs less attractive to investors.

The Securities and Exchange Commission amended regulation S-K, section 210 in September 2018 to reduce the scale of reporting for Smaller Reporting Companies, keeping many of the scaled reporting requirements from the Emerging Growth Company requirements under the JOBS act. Smaller Reporting Companies are defined based on public capital and revenue limits and GI Dynamics qualifies as a Smaller Reporting Company for the period ended December 31, 2019. As a result, the Company’s reporting is compliant with the Smaller Reporting Company requirements. GI Dynamics cannot predict if investors will find its common stock or CDIs less attractive because it relies on these reporting exemptions. If some investors find the Company’s common stock or CDIs less attractive as a result, there may be a less active trading market for the Company’s common stock or CDIs and the Company’s stock price may be more volatile.

Changes in economic conditions may adversely affect the Company’s business.

Changes in the general economic climate in which the Company operates may adversely affect its financial performance and the value of its assets. Factors that contribute to that general economic climate include:

Stock market fluctuations may adversely affect the price of the Company’s CDIs and common stock.

There are a number of risks associated with any stock market investment. GI Dynamics CDIs have been traded on the ASX since September 7, 2011. The price of GI Dynamics CDIs has been, and is likely to continue to be, volatile, which means that the value could decline substantially within a short period of time. The value of the CDIs will be determined by the stock market and will be subject to a range of factors beyond the Company’s control. These factors include movements in local and international stock exchanges, local interest rates and exchange rates, domestic and international economic and political conditions, government taxation, market supply, competition and demand and other legal, regulatory or policy changes.

The trading volume of GI Dynamics CDIs is low, which may result in reduced liquidity for GI Dynamics stockholders.

GI Dynamics CDIs are only listed on the ASX and are not listed for trading on any other securities exchanges in Australia, the U.S. or elsewhere. As such, there can be no guarantee that an active market in the CDIs will develop or continue, or that the market price of the CDIs will increase. If a market does not develop or is not sustained, it may be difficult for investors to sell their CDIs. Furthermore, the market price for the CDIs may fall or be made more volatile because of the relatively low volume of trading in GI Dynamics securities. When trading volume is low, significant price movement can be caused by trading in a relatively small number of shares.

Sales of a substantial number of CDIs, or the perception that these sales may occur, could cause the market price of GI Dynamics CDIs to decline. Sales by current stockholders of a substantial number of CDIs, or the expectation that such sales may occur, could significantly reduce the market price of GI Dynamics CDIs. The Company may also offer additional CDIs in subsequent offerings, which may adversely affect the market price for the CDIs.

Some current stockholders can exert control over the Company and may not make decisions that are in the best interests of all stockholders.

As ofAt December 31, 2019, two stockholders and their affiliated entities2020, Crystal Amber owned approximately 84%93% of the Company’s outstanding shares of common stock or CDIs representing common stock, in the aggregate. One stockholderand would be able to exert a significant degree of influence over the Company’s management of its affairs and over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. The second largest stockholder, on matters on which the largest stockholder wereCrystal Amber was ineligible to vote, would have approximately 46% of the voting power, and would be able to exert a significant degree of influence over the Company’s management of its affairs and over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may harm the market pricevalue of the CDIs and the Company’s common stock by delaying or preventing a change in control, even if a change is in the best interests of other stockholders. This concentration of ownership may also delay, deter, or prevent acts that may be favored by other stockholders, as the interests of these controlling stockholders may not always coincide with the interests of other stockholders. In addition, this concentration of share ownership may adversely affect the trading price of the Company’s shares because it may limit the trading volume and purchase demand for outstanding shares, could adversely affect the Company’s stock price should any of these stockholders elect to sell some or all of their shares, and investors may perceive disadvantages in owning shares in a company with significant stockholders.

Provisions of the Company’s certificate of incorporation, the Company’s bylaws and Delaware law could make an acquisition of the Company more difficult.

Certain provisions of the Company’s certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition or other change of control that the Company’s stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their CDIs or common stock. These provisions could also limit the price that investors might be willing to pay in the future for the CDIs or common stock, thereby depressing the market price of these securities. Stockholders who wish to participate in these transactions may not have the opportunity to do so. In addition, GI Dynamics is incorporated in the State of Delaware and, as such, is governed by the provisions of Section 203 of the Delaware General Corporation Law, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on GI Dynamics common stock, from merging or combining with the Company for a prescribed period of time.

GI Dynamics does not intend to pay cash dividends on its common stock in the foreseeable future.

GI Dynamics has never declared or paid any cash dividends on its shares of common stock, and it currently does not anticipate paying any cash dividends in the foreseeable future. The Company intends to retain any earnings to finance the development and expansion of the Company’s products and business. Accordingly, the Company’s stockholders will not realize a return on their investment unless the trading price of GI Dynamics CDIs or common stock appreciates.

The Company’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited.

The Company’s ability to utilize its federal net operating losses and federal tax credits may be limited under Sections 382 and 383 of the Internal Revenue Code. The limitations apply if an ownership change, as defined by Section 382, occurs. Generally, an ownership change occurs when certain stockholders increase their aggregated ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). The Company may already be subject to Section 382 limitations due to previous ownership changes. In addition, future changes in stock ownership may also trigger an ownership change and, consequently, a Section 382 limitation. Due to the significant complexity and cost associated with a change in control study, and the expectation of continuing to incur losses whereby the net operating losses and federal tax credits are not anticipated to be used in the foreseeable future, the Company has not assessed whether there have been changes in control since its formation. If GI Dynamics has experienced changes in control at any time since its formation, utilization of its net operating losses and research and development credit carryforwards would be subject to annual limitations under Sections 382 and 383, respectively. Any limitation may result in expiration of a portion of the net operating loss or research and development credit carryforwards before utilization, which would reduce the Company’s gross deferred tax assets and corresponding valuation allowance. As a result, if GI Dynamics earns net taxable income, its ability to use the pre-change net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to the Company.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

In June 2016, GI Dynamics entered into a non-cancelable agreement to lease approximately 4,200 square feet of office and laboratory space in Boston, Massachusetts. The lease commenced in June 2016 and expired in April 2018.

In December 2018, GI Dynamics entered into a membership agreement with WeWork for 985 square feet of office space located in Boston, Massachusetts. The committed lease term expired in May 2019.

On April 22, 2019, GI Dynamics entered into a lease for 3,520 square feet of office space in Boston, Massachusetts. The lease period commenced on May 1, 2019 and expires in May 2022.

ITEM 3. LEGAL PROCEEDINGS

GI Dynamics is currently not involved in any litigation that it believes could have a materially adverse effect on its financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of its subsidiaries, threatened against or affecting the Company, its common stock, any of its subsidiaries or of the Company’s or its subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. From time to time, the Company may become involved legal proceedings, lawsuits, claims and regulations in the ordinary course of its business.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

GI Dynamics CDIs, each representing one-fiftieth of one share of GI Dynamics common stock, have beenwere listed on the ASX under the trading symbol “GID” sincefrom September 7, 2011. Prior2011 to such time there was noJuly 22, 2020. No public market for the Company’s securities.securities existed prior to September 7, 2011 or after July 22, 2020.

On December 31, 2019,July 22, 2020, the last reported sale price of GI Dynamics CDIs was A$0.0170.002 per CDI, or $0.60$0.07 per share of common stock.

As of December 31, 2019, 3,331,154 of GI Dynamics2020, 491,636 shares of common stock were subject to outstanding options restricted stock units and warrants to purchase shares of common stock.

Holders

At March 12, 2020,5, 2021, the Company had 36,598,29188,095,659 shares of common stock issued and outstanding with 19716 registered holders of record. The holders included CHESS Depositary Nominees Pty Limited, or CDN, which held 36,524,665 shares of GI Dynamics common stock on behalf of the CDI holders; there were approximately 824 registered owners of GI Dynamics CDIs at March 12, 2020.

The Company’s transfer agent and registrar for its common stock is American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219. The Company’s registrar for its CDIs is Link Market Services Limited, Level 12, 680 George Street, Sydney NSW 2000.

Equity Compensation Plan Information

The information required to be disclosed by Item 201(d) of Regulation S-K, “Securities Authorized for Issuance Under Equity Compensation Plans” is referenced under Item 12 of Part III of this Annual Report on Form 10-K.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s consolidated financial statementsConsolidated Financial Statements and related notes to those financial statements appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should review the “Risk Factors” section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.

Overview

GI Dynamics is a clinical stage medical device company located in Boston, Massachusetts. The Company has developed EndoBarrier, a medical device intended to treat patients with type 2 diabetes and to reduce obesity. GI Dynamics is taking the steps necessary to obtain the regulatory approvals required to market this product. In order to market EndoBarrier in the U.S., GI Dynamics must obtain approval from the FDA. In order to market EndoBarrier outside of the U.S., GI Dynamics is required to comply with various regulations imposed by the countries in which it seeks to sell the product.

In 2010, EndoBarrier received CE Marking for sale in the European Union and in 2011, EndoBarrier was listed on the Australian Register of Therapeutic Goods. As a result, during 2013 and 2014, the Company received approximately $2.8 million and $2.3 million, respectively, in revenue from the sale of EndoBarrier in Europe, South America and the Asia Pacific region. In the U.S. in 2013, the Company began enrollment of patients in the initial pivotal trial of EndoBarrier, which is referred to as the ENDO trial.

In the third quarter of 2015, the Company announced its decision to discontinue the ENDO trial because patients were experiencing a higher than previously observed level of hepatic (liver) abscesses. In the fourth quarter of 2016, GI Dynamics received formal notification from the TGA of the Australian government of the cancellation of EndoBarrier’s inclusion on the ARTG. In the fourth quarter of 2017 the Company received formal notification of CE mark withdrawal from its notified body in Europe, preventing the sale of EndoBarrier in Europe and select Middle Eastern countries. The Company undertook comprehensive cost-cutting measures throughout 2015 and 2016, including significantly reducing the number of its employees.

Following the decision to discontinue the ENDO trial, GI Dynamics undertook significant investigational and scientific analyses with the goal of reducing the incidence rate and severity of hepatic abscess concurrent with the EndoBarrier treatment. This investigational work focused on understanding the root cause of hepatic abscess and how to reduce the rate of occurrence. This included: DNA analysis of normal EndoBarrier removals as well as hepatic abscess EndoBarrier removals, numerous meta-analyses and responder cohort analyses, investigation into the contributing factors represented by proton pump inhibitors (PPIs), leaky gut syndrome and microbiome analyses, among other research. This allowed the Company to modify the medications utilized with EndoBarrier, most notably discontinuation of chronic double-dose PPI usage during EndoBarrier implant.

As a result of the efforts described above, in August 2018, GI Dynamics received an IDE from the FDA to begin enrollment in a pivotal trial evaluating the safety and efficacy of EndoBarrier in the United States pending IRB approval, which was received on February 13, 2019. In this report, the Company refers to this pivotal trial as the GI Dynamics STEP-1 clinical trial. On January 27, 2020, the first patient was randomized into the STEP-1 Trial Protocol.

For financial reporting purposes, the Company have one reportable segment, which designs, manufactures and plans to market EndoBarrier.

To date, GI Dynamics has devoted substantially all of its efforts to research and development, business planning, clinical research, clinical study management, reimbursement development, product commercialization, acquiring operating assets and raising capital. GI Dynamics has incurred significant operating losses since its inception in 2003. As of December 31, 2019,2020, the Company had an accumulated deficit of approximately $284$296 million. The Company expects to incur net losses for the next several years while it continues to evaluate which markets are appropriate to continue pursuing reimbursement, market awareness and general market development efforts, and continues to restructure its business and costs, establish new priorities, continue limited research, and evaluate strategic options.

GI Dynamics has raised net proceeds of approximately $273$283 million through sales of the Company’s equity and placement of debt, of which $9.3$9.5 million was raised through the Company’s 2019 financings.

In February and March 2018, GI Dynamics raised approximately $1.6 million in an offering of the Company’s CDIs to qualified investors, including certain existing investors, in Australia, the United States and the United Kingdom.

In May 2018, GI Dynamics placed a Convertible Term Promissory Note and Warrant (the “2018 Note and Warrant”) with Crystal Amber for a note principal amount of $1.75 million. The 2018 Note accrued interest at 10% per annum, compounded annually, and could be converted to CDIs at $0.018 per CDI until maturity on May 30, 2023. The warrants conferred the right to purchase 97,222,200 CDIs for $0.018 per CDI with anti-dilution protections.

In August 2018, GI Dynamics received notification from the FDA that it had approved the IDE application for EndoBarrier, pending IRB approval, which was received in February 2019.

In September and November 2018, GI Dynamics raised approximately $5 million in an offering2020 that included the debt portion of the Company’s CDIs to qualified investors, including certain existing investors, in Australia, the United States2019 financing and the United Kingdom.

In October 2018, GI Dynamics announced that it signed an agreement with its new notified body Intertek to pursue CE marking of EndoBarrier in Europe. The Company has since suspended its relationship with Intertek and is working with a different notified body whose identity will be announced when the service agreement is finalized.

In November 2018, the Company signed a clinical trial agreement and a memorandum of understanding with its clinical and potential commercial partner Apollo Sugar, a division of Apollo Hospitals Group located in India.

In December 2018, GI Dynamics announced the appointment of Charles Carter, a consultant, as the Company’s Chief Financial Officer and Secretary. Mr. Carter became an employeeInitial Close of the Company on September 1, 2019.2020 Financing.

In March 2019, the Company completed a convertible term promissory note (the “March 2019 Note”) and warrant (the “March 2019 Warrant”) financing with Crystal Amber for a gross amount of $1 million. The March 2019 Note compounded interest annually at 10% and, subject to Stockholder Approval required under ASX Listing Rules, Crystal Amber was conferred the right to optionally convert all unpaid principal and interest to CDIs at $0.0127 per CDI before the Note Maturity date in March 2024. Per the March 2019 NPA, the Company agreed to issue a warrant (the “March 2019 Warrant”) to Crystal Amber, pending Stockholder Approval, to purchase 78,984,823 CDIs (representing 1,579,696 shares of common stock) at an initial exercise price of $0.0127 per CDI. The issuance of the March 2019 Warrant required the approval of stockholders and was not exercisable until it was approved on June 30, 2019. (See Note 9 of the Consolidated Financial Statements for a more complete description of the terms and conditions of the financing).

In March 2019, the maturity date of the 2017 Note was extended to May 1, 2019. In April 2019, the maturity date of the 2017 Note was extended to July 1, 2019. Further extensions of the maturity date of the 2017 Note are described below.

In May 2019, the Company completed a convertible term promissory note (the “May 2019 Note”) and warrant (the “May 2019 Warrant”) financing with Crystal Amber for a gross amount of $3 million. The May 2019 Note compounded interest annually at 10% and, subject to Stockholder Approval required under ASX Listing Rules, Crystal Amber was conferred the right to optionally convert all unpaid principal and interest to CDIs at $0.0127 per CDI before the Note Maturity date in May 2024. Per the May 2019 NPA, the Company agreed to issue a warrant (the “May 2019 Warrant”) to Crystal Amber, pending Stockholder Approval, to purchase 236,220,472 CDIs (representing 4,724,409 shares of common stock) at an initial exercise price of $0.0127 per CDI. The issuance of the May 2019 Warrant required the approval of stockholders and was not exercisable until it was approved on June 30, 2019. (See Note 9 of the Consolidated Financial Statements for a more complete description of the terms and conditions of the financing).

In June 2019, the maturity date of the 2017 Note was extended to October 1, 2019.

On June 30, 2019, Crystal Amber elected to convert the 2018 Note, the March 2019 Note and the May 2019 Note into CDIs. Under the terms of the respective notes, an aggregate of 453,609,963 CDIs (representing approximately 9,072,197 shares of common stock) were subscribed but unissued on conversion and concurrent cancellation of the 2018 Note, the March 2019 Note and the May 2019 Note. The CDIs were issued on July 3, 2019.

On August 21, 2019, the Company and Crystal Amber entered into a securities purchase agreement for a total funding of up to approximately $10 million (the “August 2019 SPA”). The initial $5.4 million was comprised of existing warrant exercises scheduled between August 25, 2019 and November 15, 2019. Exercises included the 2018 Warrant, the March 2019 Warrant, and the May 2019 Warrant issued to Crystal Amber, as further detailed above. The remaining amount of the August 2019 funding was represented by a Convertible Term Promissory Note (“August 2019 Note”) of up to approximately $4.6 million and a related Warrant (“August 2019 Warrant”) in substantially the same form as the March 2019 and May 2019 convertible term promissory note. Under the terms of the August 2019 SPA and August 2019 Note, the Company, at its sole discretion, could elect to request any of the $4.6 million to be funded at any date on or before December 6, 2019. The conversion feature allows the conversion of the August 2019 Note’s unpaid principal and interest at $0.02 per CDI and the August 2019 Warrant, upon its issue, allowed the purchase for $0.02 per CDI a number of CDIs represented by the August 2019 Note principal divided by $0.02 per CDI. (See Note 9 of the Consolidated Financial Statements for a more complete description of the terms and conditions of the financing).

On August 21, 2019, the maturity date of the 2017 Note was extended to March 31, 2020.

On August 25, 2019, Crystal Amber exercised the 2018 Warrant and a portion of the March 2019 Warrant in accordance with the terms of the August 2019 SPA. For an aggregate cash payment of $2 million, 97,222,200 CDIs (representing approximately 1,944,444 shares of common stock) were issued at $0.0144 per CDI under the 2018 Warrant and 47,244,119 CDIs (representing approximately 944,882 shares of common stock) were issued at $0.0127 per CDI under the March 2019 Warrant.

On September 30, 2019, Crystal Amber exercised the remaining portion of the March 2019 Warrant and a portion of the May 2019 Warrant in accordance with the August 2019 SPA. For an aggregate cash payment of $2 million, 31,740,704 CDIs (representing approximately 634,814 shares of common stock) were issued at $0.0127 per CDI under the March 2019 Warrant and 125,739,610 CDIs (representing approximately 2,514,792 shares of common stock) were issued on October 4, 2019 at $0.0127 per CDI under the May 2019 Warrant. As of September 30, 2019, this was recorded as a subscription receivable from a related party and the cash was received on October 1, 2019.

On October 31, 2019, Crystal Amber exercised another portion of the May 2019 Warrant in accordance with the August 2019 SPA. For an aggregate cash payment of $1 million, 78,740,157 CDIs (representing approximately 1,574,803 shares of common stock) were issued on November 4, 2019 at $0.0127 per CDI under the May 2019 Warrant. Cash was received on October 31, 2019.

On November 15, 2019, Crystal Amber exercised the final portion of the May 2019 Warrant in accordance with the August 2019 SPA. For an aggregate cash payment of approximately $0.4 million, 31,740,748 CDIs (representing approximately 634,814 shares of common stock) were issued on November 18, 2019 at $0.0127 per CDI under the May 2019 Warrant. Cash was received on November 15, 2019.

On December 2, 2019, GI Dynamics provided notice to Crystal Amber that the Company elected to place the August 2019 Note at the full amount, on or before December 6, 2019. In December, the Company and Crystal Amber agreed to confer the right to tranche the funding of the August 2019 Note in amounts and per timing chosen solely by Crystal Amber, provided the August 2019 Note total was funded on or before January 15, 2020.

On December 16, 2019, GI Dynamics’ stockholders approved the August 2019 Note conversion feature and the issuance of the August 2019 Warrant, pending funding of the August 2019 Note by Crystal Amber.

On January 13, 2020, GI Dynamics received approximately $4.6 million in cash representing the full funding of the August 2019 Note. As stockholder approval had been obtained in December 2019, the August 2019 Note became convertible at Crystal Amber’s sole discretion until maturity in August 2024.January 2025. Additionally, the August 2019 Warrant was issued to Crystal Amber, providing for the purchase of up to 229,844,650 CDIs (representing 4,596,893 shares of common stock) at $0.02 per CDI.

On March 31, 2020, the maturity date of the 2017 Note was extended to May 1, 2020. On April 30, 2020, the maturity date of the 2017 Note was extended to May 15, 2020. On May 15, 2020, the maturity date of the 2017 Note was extended to June 15, 2020. On June 15, 2020, the maturity date of the 2017 Note was extended to June 29, 2020.  On June 29, 2020, the maturity date of the 2017 Note was extended to July 31, 2020.

On May 11, 2020, the Company received approximately $200 thousand from a lender under the Paycheck Protection Program (“PPP”) Loan program of the 2020 CARES Act. The PPP loan accrues interest at 1% with payments deferred for six months and a maturity date two years from loan approval. The Company may apply for loan forgiveness subject to completion of an application and appropriate use of the loan proceeds as defined in the PPP loan structure. The Company must use a defined portion of the proceeds for payroll and the remainder for qualified facilities expenses during a defined measurement period. The Company has completed the measurement period and believes all conditions for forgiveness were met. The lender through which the Company received the PPP Loan has been resolving implications of ongoing legislative updates, the most recently being in December 2020, and as such, the Company has not been able to submit an application for forgiveness. The ability to submit forgiveness applications has been frozen as of February 16, 2021, but the Company will apply for forgiveness when the lender accepts forgiveness applications.

On June 18, 2020, the Company entered into a Note Purchase Agreement (“June 2020 NPA”) with Crystal Amber, pursuant to which, the Company issued and sold to Crystal Amber, a Convertible Promissory Note in an aggregate original principal amount of $750 thousand (the “June 2020 Note”). The note and accrued interest mandatorily converted at the September 4, 2020 Initial Close of the September 2020 Financing into approximately 10.6 million shares of Series A Preferred Stock.

On July 13, 2020, Crystal Amber provided the Company with a notice of optional conversion of the 2017 Note, thereby converting the principal of $5 million and the accrued and unpaid interest of $390 thousand into 2,574,873,400 CDIs, which is equal to 51,497,468 shares of Common Stock. On receipt of the notice of conversion, the Company did not have sufficient authorized shares to allow full conversion. The available 38,401,704 shares were issued to CDN, allowing the allotment of 1,920,085,200 CDIs to Crystal Amber and a Right to Shares and Waiver Agreement in which the Company agreed to issue the remaining 13,095,764 shares of Common Stock owed under the conversion when the Company has filed an amended and restated certification of incorporation with the Delaware Secretary of State after the Company was delisted from the ASX and in connection with the consummation of the September 2020 Financing.

On July 22, 2020, GI Dynamics was removed from the Official List of the ASX and all CDIs were converted to shares of Common Stock. Although the Company’s securities are not traded on any exchange, the Company remains subject to SEC reporting requirements.

On August 4, 2020, the Company entered into a Note Purchase Agreement (“August 2020 NPA”) with Crystal Amber, pursuant to which, the Company issued and sold to Crystal Amber, a Convertible Promissory Note in an aggregate original principal amount of $500 thousand (the “August 2020 Note”). The note and accrued interest mandatorily converted at the September 4, 2020, Initial Close of the September 2020 Financing into approximately 7.1 million shares of Series A Preferred Stock.

On September 3, 2020, Shareholders approved an increase in shares of authorized Common Stock to 280 million and authorized 118 million shares of a new Series A Preferred class of capital stock. The approval for the increase in the authorized shares of Common Stock allowed for the immediate issuance of the remaining 13,095,764 shares of Common Stock owed to Crystal Amber under the Right to Shares and Waiver Agreement.

On September 4, 2020, the Company executed a series of financing-related agreements (“the September 2020 Financing”) which included the cancellation of the August 2019 Warrant, the restructuring of the August 2019 Note into the September 2020 Note (see below for a detailed description of the September 2020 Note and the accounting classification of the August 2019 Note restructuring into the September 2020 Note), the conversion of the June and August 2020 Convertible Notes into shares of Series A Preferred Stock (see below for a detailed description of the June and August 2020 Notes and Note 10 to the Consolidated Financial Statements for a description of the Series A Preferred Stock), and the sale of $8.75 million of Series A Preferred Stock to Crystal Amber under the Series A Preferred Stock Purchase Agreement (the “Series A SPA”, see Note 11 to the Consolidated Financial Statements for a description of the Series A SPA terms). The Initial Close of the September 2020 Financing occurred on September 4, 2020, and included all components of the September 2020 Financing, including the Crystal Amber purchase of 42,310,730 shares of Series A Preferred Stock for gross proceeds of $3.75. Pursuant to the Series A SPA and subsequent amendments, the Second Close was originally to occur on October 31, 2020 but through a series of extensions, was extended until February 24, 2021. On February 24, 2021, an individual investor closed the purchase of 600,000 shares of Series A Preferred Stock for approximate proceeds of $53 thousand. Effective February 24, 2021, Crystal Amber executed a contract amendment restructuring the Second Close to include the sale of 16,924,292 shares of Series A Preferred Stock for proceeds of $1.5 million to close on March 4, 2021, the sale of 11,282,861 shares of Series A Preferred Stock for proceeds of $1.0 million to close no later than March 25, 2021, and the remaining 27,607,153 shares of Series A Preferred Stock for proceeds of $2.45 million to close no later than May 28, 2021.

The Company’s costs include employee salaries and benefits, compensation paid to consultants, materials and supplies for research, costs associated with development activities including materials, sub-contractors, travel and administration, legal expenses, sales and marketing costs, general and administrative expenses, and other costs associated with an earlya clinical and emerging commercial stage publicly-traded medical technology company. As ofAt March 12, 2020,11, 2021, GI Dynamics has 1512 full-time employees. The number of employees required to support the Company’s activities as it moves the EndoBarrier through the GI Dynamics STEP-1 and the I-step clinical trial,trials, as well as in the areas of research and development, sales and marketing, and general and administrative functions, may increase. GI Dynamics expects to continue to incur consulting expenses related to technology development that will increase as it enters into the recruitment phase of the STEP-1 and IndiaI -Step clinical trials, and the Company expects to continue to incur expenses to protect its intellectual property.

The amount that GI Dynamics spends for any specific purpose may vary significantly from quarter to quarter or year to year, and could depend on a number of factors including, but not limited to, the pace of progress of the GI Dynamics STEP-1 and IndiaI-Step clinical trials, commercialization and development efforts and actual needs with respect to development and research.

Research, development, and commercial acceptance of new medical technologies are, by their nature, unpredictable. Although the Company will undertake development and commercialization efforts with reasonable diligence, there can be no assurance that the net proceeds from the Company’s securities offerings will be sufficient to enable the Company to develop the Company’s technology to the extent needed to create future sales to sustain operations. If the net proceeds from these offerings are insufficient for this purpose, GI Dynamics will consider other options to continue its path to commercialization, including, but not limited to, additional financing through follow-on equity offerings, debt financing, co-development agreements, sale or licensing of developed intellectual or other property, or other alternatives.

GI Dynamics cannot assure that its technology will be accepted, that it will ever earn revenues sufficient to support its operations, or that it will ever be profitable. Furthermore, the Company has no committed source of financing and cannot assure that it will be able to raise money as and when it needs it to continue operations. If the Company cannot raise funds as and when it needs them, it may be required to scale back development plans by reducing expenditures for employees, consultants, business development and marketing efforts or to otherwise severely curtail, or even to cease, business operations.

The Company’s corporate headquarters are located in Boston, Massachusetts. The Company leases 3,520 square feet of office space with a lease expiration in May 2022. This space is adequate for current operations.

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition and results of operations is based upon the Company’s consolidated financial statementsConsolidated Financial Statements prepared in accordance with generally accepted accounting principles in the United States. GI Dynamics believes that its application of the following accounting policies, each of which require significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating the Company’s reported financial results. The Company’s significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies and Basis of Presentation”, to the Company’s consolidated financial statementsConsolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

Use of Estimates

The preparation of consolidated financial statementsConsolidated Financial Statements in accordance with generally accepted accounting principles in the U.S. requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, the Company’s management evaluates its estimates, including those related to impairment of long-lived assets, income taxes including the valuation allowance for deferred tax assets, research and development, contingencies, valuation of warrant liabilities and otherany derivative liabilities, estimates used to assess its ability to continue as a going concern and stock-based compensation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.

Going Concern Evaluation and Presentation

GI Dynamics analyzes its ability to continue as a going concern in each reporting period, assessing the likelihood that the company will be able to fund operations for the twelve months after the filing date of the financial statements. For further information regarding the Company’s funding requirements, see Note 1, “Nature of Business – Going Concern Evaluation”, to the Company’s consolidated financial statements. The Company has concluded and disclosed that there is substantial doubt in its ability to continue a going concern for a twelve-month period after the filing of this Annual Report on Form 10-K.

While there remains substantial doubt of the Company continuing as a going concern, the Company is seeking alternative financing sources and evaluating contingency plans that, while not guaranteed to yield the ability to fund operations at current levels, provide a reasonable probability that the Company will be able to maintain at least a subset of business operations. Therefore, the accompanying consolidated financial statementsConsolidated Financial Statements have been prepared assuming GI Dynamics will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. The consolidated financial statementsConsolidated Financial Statements for the year ended December 31, 20192020 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statementsConsolidated Financial Statements are issued.

Inventory

GI Dynamics fully reserved its inventory as of December 31, 2017 and subsequently wrote off all inventory and reserves in 2018 as the materials on hand were not expected to be usable for future sales. At December 31, 2018 and 2019, there is no inventory or reserves against inventory on the balance sheet.

When the Company resumes recording inventory, it will state inventory at the lower of first-in, first-out cost or net realizable value. The Company will record a provision for excess, expired, and obsolete inventory based primarily on estimates of forecasted revenues. A significant change in the timing or level of demand for products as compared to forecasted amounts may result in the recording of additional provisions for excess, expired, and obsolete inventory. When capitalizing inventory, the Company will consider factors such as status of regulatory approval, alternative use of inventory, and anticipated commercial use of the product.

Fair Value of Derivative Instruments and Debt Instruments

GI Dynamics examines all financial instruments to determine if the financial instrument or any component feature that is a derivative requires liability treatment, predominantly due to a cash settlement feature. Such derivative liabilities are initially recorded at fair value with subsequent changes in value recorded in other income (expense) in the statements of operations. If the derivative instruments subsequently meet the requirements for classification as equity, the Company reclassifies the then fair value of the instrument to equity. The Company values its outstandingfree-standing warrants and any other derivative liabilities identified using the Black-Scholes option pricing model. If multiple outcomes are probable, management assigns probability adjustments to determine the most likely probability adjusted fair value.

GI Dynamics examines all debt to determine if any component feature of the debt requires fair value measurement or requires fair value measurement to allocate debt proceeds to the various components and features. When assumptions are reasonably known, the net present value of the cash flows of the debt are used to estimate the fair value of the note component, while a Black-Scholes option pricing model is used to value warrants and beneficial conversion features are measured at the intrinsic value of the effective conversion price.

Research and Development Costs

Research and development costs are expensed when incurred. Research and development costs include costs of all basic research activities as well as other research, engineering, and technical effort required to develop a new product or service or make significant improvement to an existing product or manufacturing process. Research and development costs also include preapproval regulatory and clinical trial expenses.

Stock-Based Compensation

GI Dynamics accounts for stock-based compensation in accordance with the Financial Accounting Standards Board, (“FASB”) Accounting Standards Codification (“ASC”) 718,Stock Compensation (“ASC 718”), which requires that stock-based compensation be measured at the grant date fair value and recognized as an expense in the consolidated financial statements and that such expense be measured at the grant date fair value.statements.

For awards that vest based on service conditions, the Company uses the straight-line method to allocate compensation expense to reporting periods. The grant date fair value of options granted is calculated using the Black-Scholes option pricing model, which requires the use of subjective assumptions including volatility, expected term and the fair value of the underlying common stock, among others.

The assumptions used in determining the fair value of stock-based awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change, and the Company uses different assumptions, its stock-based compensation could be materially different in the future. The risk-free interest rate used for each grant is based on a zero-coupon U.S. Treasury instrument with a remaining term similar to the expected term of the stock-based award. Because the Company does not have a sufficient stable history to estimate the expected term, the simplified method for estimating the expected term is used. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The Company uses historical price volatility datathe Company’s stock equivalents or that of comparable companies to estimate expected future stockhistorical price volatility. GI Dynamics has not paid and does not anticipate paying cash dividends on shares of common stock; therefore, the expected dividend yield is assumed to be zero. The Company accounts for forfeitures as they occur, rather than applying an estimated forfeiture rate to the value of the grant on the grant date.

GI Dynamics periodically issues performance-based awards. For these awards, vesting will occur upon the achievement of certain milestones. When achievement of the milestone is deemed probable, the Company expenses the compensation of the respective stock award over the implicit service period.

Stock awards to non-employees wereare accounted for in accordance with ASC 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). The measurement date for non-employee awards was generally the date performance of services required from the non-employee was complete. For non-employee awards that vest based on service conditions,718, as the Company expensed the value of the awards over the related service period, provided the service condition was expected to be met. The Company recorded the expense of services rendered by non- employees based on the estimated fair value of the stock option using the Black-Scholes option pricing model over the contractual term of the non-employee award. At each reporting period, the fair value of unvested non-employee awards was remeasured and expensed on a straight-line basis over the vesting term of the underlying award. In June 2018, theadopted FASB issued ASUAccounting Standards Update (“ASU”) No. 2018-07,Compensation – Stock Compensation (Topic 718: Improvements to nonemployee share-based payment accounting), or (“ASU 2018-07, which2018-07”) on January 1, 2019. This ASU provides measurement provisions and clarifications for the accounting for Non-employee Share-Based Payments (“NESBP”). As a result, mostMost of the guidance within ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, now applies to NESBP. The Company adopted ASU 2018-07elects to use the contractual term of each award as of January 1, 2019 and there was no impact to retained earnings or equity as no uncompleted NESBPs were outstanding when adopted.the expected term for NESBP awards. At December 31, 2019,2020, the Company had options to purchase 120,00015,000 shares of common stock granted to non-employees.

Impairment of Long-Lived Assets

GI Dynamics regularly reviews the carrying amount of its long-lived assets to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives. If indications of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to determine whether the asset’s value is recoverable. If the carrying value of the asset exceeds such projected undiscounted cash flows, the asset will be written down to its estimated fair value.

Smaller Reporting Company Status

The Securities and Exchange Commission amended regulation S-K, section 210 in September 2018 to reduce the scale of Smaller Reporting Companies. Smaller Reporting Companies are defined based on public capital and revenue limits and GI Dynamics qualifies as a Smaller Reporting Company for the year ended December 31, 2019.2020. As a result, the Company’s reporting is compliant with the Smaller Reporting Company requirements.

Results of Operations

The following is a description of significant components of the Company’s operations, including significant trends and uncertainties that are believed to be important to an understanding of the Company’s business and results of operations.

Year Ended December 31, 20192020 Compared to Year Ended December 31, 20182019

GI Dynamics did not record any revenue in the years ended December 31, 20192020 or 2018.2019.

Operating Expenses

Research and Development Expense. The increasedecrease in research and development expense of approximately $2.3 million$741 thousand for the year ended December 31, 20192020 compared to the year ended December 31, 20182019 was primarily due to an increasea decrease in spending on internal and external resources as the COVID-19 pandemic caused clinical pauses on trial enrollment and slowed international regulatory reviews to start the I-Step Trial and perform CE mark certification audits. In 2019 the Company incurred expenses to prepared tofor and initiate the STEP-1 clinical trial in the United States, the I-STEP trial in India (under joint venture with Apollo Sugar) and prepare for audits related to filing for its CE Mark designation. In the same period in 2018, the Company had just received the IDE from the FDA and had not moved from the planning stages on all three strategic priorities.

Sales and Marketing Expense. The decrease in sales and marketing expense of approximately $844$22 thousand for the year ended December 31, 20192020 compared to the year ended December 31, 20182019 was primarily due to an overall decrease inlimited spending on sales and marketing activitiesgiven COVID-19 pandemic delays and the focus of resources on a redirection of existing overseas employee efforts to research and development.marketing project that remains a prepaid expense until fully implemented.

General and Administrative Expense. The increase in general and administrative expense of approximately $486$326 thousand for the year ended December 31, 20192020 compared to the year ended December 31, 20182019 was primarily related to increased business insurancecompensation expenses offset by reductions in travel-related expenses due to COVID-19, board of directors related expenses and costs increased support costs for higher employee counts and additional legal and insurance costs related to transacting multiple financing events as aassociates with public company that is subject to reporting in two jurisdictions.listing on the ASX.

GI Dynamics continues to look for ways to streamline the Company’s generalexpenses, especially in General and administrative expenses. In so doing, the Company recognizes that some costs, particularly those associated with being a public company with multiple reporting jurisdictions are unavoidable. GI Dynamics will continue to provide general and administrative support for the scope and size of the entire company.Administrative departments.

Other Income (Expense), Net

Interest income. The decrease in interest income of approximately $26$3 thousand for the year ended December 31, 20192020 compared to the year ended December 31, 20182019 was due to lower average cash cash equivalents and restricted cash balances in 2019.2020.

Interest expense. Interest expense increaseddecreased by approximately $5$4.6 million foras the debt discount amortization in the year ended December 31, 2020 was less than the aggregate debt discount amortization in the year ended December 31, 2019 compared to the year ended December 31, 2018 primarily due toand non-cash interest expenses related to the June 2019 conversion of the 2018, March 2019 and May 2019 Notes payable to Crystal Amber.

Income from diverted fundsForeign exchange gain (loss). The $29 thousand difference in the foreign exchange gain (loss) reflects foreign exchange rate fluctuations on immaterially changed balances.

Loss on extinguishment of debt. The $678 thousand loss related to the restructuring of the August 2019 Note and insurance claim, net.In July 2018, after a third-party investigation isolatedcancellation of the activity, an insurance claim was filed for $271 thousand for fraudulent diversion of cash fromAugust 2019 Warrant into the Company’s account into a personal account thatSeptember 2020 Note which occurred during the years 2016 through 2018. Income in the year ended December 31, 2018 represents net insurance proceeds on the claim less $22 thousand of research and development expense. The Company has since implemented internal controls to correct the identified control deficiencies associated2020 with the fraud.

Foreign exchange gain. The changeno similar transaction in the foreign exchange gain is minimal as the balances and transactions are comparable year over yearended December 31, 2019.

Re-measurement of derivative liabilities. The changeThere were no re-measurements of derivative liabilities in the2020, while re-measurement of derivative liabilities oftotaled approximately $2.2$1.7 million for the year ended December 31, 2019, compared to the year ended December 31, 2018which was primarily due to the revaluation of the March and May 2019 warrants prior to stockholder approval. During the intervening period between Note issuance and derivative remeasurement, the market price per CDI increased significantly which resulted in a higher value driven by the widened spread between the exercise price and the market price and less so in the increased volatility resulting from the change in the price of the CDIs.

Gain on write-off of accounts payable. The change in the gain on write off of accounts payable reflects approximately $101 thousand of settled accounts payable in 2019 versus none in 2020.

Other expenses (income). The $236 thousand of Other Income recorded in the year ended December 31, 2020 is predominantly the $165 reversal of reserves for product returns given the expiration of all product previously eligible for return, $42 thousand in foreign COVID-19 related payroll assistance programs, and $10 thousand redemption of credit card cash back rewards. There were no similar transactions in the year ended December 31, 2019.

Liquidity and Capital Resources

As of December 31, 2019,2020, the Company’s primary source of liquidity is its cash cash equivalents and restricted cash balances. GI Dynamics is currently focused primarily on itsobtaining an EndoBarrier CE mark and enrolling the Company’s clinical trials, which will support future regulatory submissions and potential commercialization activities. Until the Company is successful in gaining regulatory approvals, it is unable to sell the Company’s product in any market at this time. Without revenues, GI Dynamics is reliant on funding obtained from investment in the Company to maintain business operations until the Company can generate positive cash flows from operations. The Company cannot predict the extent of future operating losses and accumulated deficit, and it may never generate sufficient revenues to achieve or sustain profitability.

GI DynamicsThe Company has incurred operating losses since inception and at December 31, 2019,2020 and had an accumulated deficit of approximately $284 million and a working capital deficit of $3.4$296 million. The Company expects to incur significant operating losses for the next several years. At December 31, 2019,2020, the Company had approximately $2.5$1.2 million in cash cash equivalents and restricted cash.

The Company will need to restructure the terms of the 2017 Notearrange additional financing before March 31, 2020 and raise additional capital before MayAugust 1, 20202021 in order to continue to pursue its current business objectives as planned and to continue to fund its operations. The Company and Crystal Amber are currently in final discussions regarding the 2017 Note maturity extension. The Company is looking to raise additional funds through any combination of additional equity and debt financings or from other sources. However,sources, however, the Company has no guarantee that the 2017 Note will not mature on March 31, 2020 and has no guaranteed source of capital that will accommodate repayment of the 2017 Note and sustain operations past March 31, 2020. If the 2017 Note terms are restructured, the Company anticipates operating cash being exhausted by MayAugust 1, 2020 and therefore requires additional financing.2021. There can be no assurance that any such potential financing opportunities will be available on acceptable terms, if at all. If the Company is unable to raise sufficient capital on the Company’s required timelines and on acceptable terms to stockholders and the Board of Directors, it could be forced to cease operations, including activities essential to support regulatory applications to commercialize EndoBarrier. If access to capital is not achieved in the near term, it will materially harm the Company’s business, financial condition and results of operations to the extent that the Company may be required to cease operations altogether, file for bankruptcy, or undertake any combination of the foregoing. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statementsConsolidated Financial Statements are issued.

In addition, if the Company does not meet its payment obligations to third parties as they become due, the Company may be subject to litigation claims and its credit worthiness would be adversely affected. Even if the Company is successful in defending these claims, litigation could result in substantial costs and would be a distraction to management and may have other unfavorable results that could further adversely impact the Company’s financial condition.

As a result of the factors described above, the Company’s consolidated financial statementsConsolidated Financial Statements include a going-concern disclosure.

During the year ended December 31, 2019,2020, the Company’s cash cash equivalents and restricted cash balance decreased by approximately $1.3 million primarily due to cash payments related to, among other things, research and development and general and administrative expenses as GI Dynamics continued to focus on clinical and regulatory strategies that exceeded its various financings.

The following table sets forth the major sources and uses of cash for each of the periods set forth below:

Cash Flows used in Operating Activities

Net cash used in operating activities totaled approximately $10.8 million for the year ended December 31, 2020. The primary uses of cash were:

Net cash used in operating activities totaled approximately $10.6 million for the year ended December 31, 2019. The primary uses of cash were:

Net cashCash Flows used in operatingInvesting Activities

No cash was used in investing activities totaled approximately $7.3 million for the year ended December 31, 2018. The primary uses of cash were:

Cash Flows used in Investing Activities2020.

Cash used in investing activities for the year ended December 31, 2019 totaled approximately $11 thousand from the purchase of office equipment.

Cash used in investingFlows provided by Financing Activities

Cash provided by financing activities for the year ended December 31, 20182020 totaled approximately $3 thousand$9.5 million and primarily resulted from the purchaseproceeds from short and long-term debt from a related party and the net proceeds from the sale of office equipment.

Cash Flows provided by Financing ActivitiesSeries A Preferred Stock.

Cash provided by financing activities for the year ended December 31, 2019 totaled approximately $9.3 million and primarily resulted from the exercise of related party warrants and proceeds from short and long termlong-term debt from a related party.

Cash provided by financing activities for the year ended December 31, 2018 totaled approximately $8.1 million and primarily resulted from the net proceeds from the Company’s private placement of CDIs.

Funding Requirements

As of December 31, 2019,2020, the Company’s primary source of liquidity is its cash cash equivalents and restricted cash balances. GI Dynamics is currently focused primarily on itsobtaining an EndoBarrier CE mark and enrolling the Company’s clinical trials, which will support future regulatory submissions and potential commercialization activities. Until the Company is successful in gaining regulatory approvals, it is unable to sell the Company’s product in any market at this time. Without revenues, GI Dynamics is reliant on funding obtained from investment in the Company to maintain business operations until the Company can generate positive cash flows from operations. The Company cannot predict the extent of future operating losses and accumulated deficit, and it may never generate sufficient revenues to achieve or sustain profitability.

GI DynamicsThe Company has incurred operating losses since inception and at December 31, 2019,2020 and had an accumulated deficit of approximately $284 million and a working capital deficit of $3.4$296 million. The Company expects to incur significant operating losses for the next several years. At December 31, 2019,2020, the Company had approximately $2.5$1.2 million in cash cash equivalents and restricted cash.

Due to the numerous risks and uncertainties associated with securing regulatory approval for EndoBarrier, at this time GI Dynamics is unable to estimate precisely the amounts of capital outlays and operating expenditures necessary to complete the task of obtaining regulatory approval for EndoBarrier. Funding requirements will depend on many factors, including, but not limited to, the following:

GI Dynamics will continue to manage its capital structure and to consider all financing opportunities, whenever they may occur, that could strengthen its long-term liquidity profile. Any such capital transactions may or may not be similar to transactions in which the Company has engaged in the past and the ownership interests of existing stockholders may be materially diluted.

Off–Balance Sheet Arrangements

GI Dynamics does not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes. As such, the Company is not exposed to any financing, liquidity, market or credit risk that could arise if it had engaged in those types of relationships. GI Dynamics enters into guarantees in the ordinary course of business related to the guarantee of its own performance and the performance of its subsidiaries.

Contractual Obligations and Commitments

The Company’s commitments for operating leases relate to the lease of office space in Boston, Massachusetts which expires in May 2022.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements please refer to Note 2, “Summary of Significant Accounting Policies and Basis of Presentation”, to the Company’s consolidated financial statementsConsolidated Financial Statements included in this Annual Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

GI Dynamics is focused on developing clinical data and regulatory approvals for EndoBarrier and the Company earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates.

Interest Rate Sensitivity

The Company’s cash cash equivalents and restricted cash balance of $2.5$1.2 million at December 31, 20192020 consisted of cash and money market funds,restricted cash, all of which will be used for working capital purposes. The Company does not enter into investments for trading or speculative purposes. The goals of the Company’s investment policy are preservation of capital, fulfillment of liquidity needs and fiduciary control of cash and investments. The Company also seeks to maximize income from investments without assuming significant risk. The Company’s primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates in the U.S. and Australia. Because of the short-term nature of the Company’s cash cash equivalents and restricted cash, GI Dynamics does not believe that it has any material exposure to changes in their fair values as a result of changes in interest rates.

Foreign Currency Risk

GI Dynamics conducts business in foreign countries. For U.S. reporting purposes, all assets and liabilities of non-U.S. entities are remeasured at the period-end exchange rate and income and expenses at the average exchange rates in effect during the periods. The net effect of these remeasurement adjustments is shown in the accompanying consolidated financial statementsConsolidated Financial Statements as a component of net loss. Continued fluctuation of these exchange rates could result in financial results that are not comparable from quarter to quarter. The Company does not currently utilize foreign currency contracts to mitigate the gains and losses generated by the remeasurement of non-functional currency assets and liabilities and dodoes not currently hold material cash reserves in foreign currencies in which certain expenditures are denominated.

Effects of Inflation

GI Dynamics does not believe that inflation and changing prices over the years ended December 31, 20192020 and 20182019 had a significant impact on its results of operations.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company’s consolidated financial statements, together with the independent registered public accounting firm report thereon, appear on pages F-1 through F-30F-33 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  

On December 5, 2019, the Company dismissed Moody, Famiglietti & Andronico, LLP (“MFA”) as its independent registered public accounting firm. The decision to dismiss MFA was approved by the Company’s Board of Directors with the recommendation of its Audit Committee. The audit reports of MFA on the consolidated financial statements of the Company for each of the two most recent fiscal years ended December 31, 2018 and December 31, 2017 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. The audit reports for the years ended December 31, 2018 and December 31, 2017 contained an explanatory paragraph disclosing the uncertainty regarding the Company’s ability to continue as a going concern. During the Company’s two most recent fiscal years ended December 31, 2018 and December 31, 2017 and during the subsequent interim period from January 1, 2019 through December 5, 2019, (i) there were no disagreements with MFA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure that, if not resolved to MFA’s satisfaction, would have caused MFA to make reference to the subject matter of the disagreement in connection with its reports and (ii) there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.None.

On December 5, 2019, the Company engaged Wolf & Company, P.C. as its independent registered public accounting firm for the fiscal year ending December 31, 2019. The decision to engage Wolf & Company, P.C. was approved by the Company’s Board of Directors with the recommendation of its Audit Committee. During the two most recent fiscal years ended December 31, 2018 and December 31, 2017 and during the subsequent interim period from January 1, 2019 through December 5, 2019, neither the Company nor anyone acting on its behalf consulted with Wolf & Company, P.C. on (i) any matters regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the Company’s consolidated financial statements, and no written report or oral advice was provided to the Company that Wolf & Company, P.C. concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any matter that was the subject of any disagreement (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15(f), GI Dynamics carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Company’s Certifying Officers concluded that the Company’s disclosure controls and procedures were effective as of December 31, 20192020 in enabling GI Dynamics to record, process, summarize and report information required to be included in its periodic SEC filings within the required time period.

Management’s Annual Report on Internal Control over Financial Reporting 

As a public company registered with the SEC in the U.S., GI Dynamics is required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, to furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting as of the end of the fiscal year. The controls and other procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files with the SEC is disclosed accurately and is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. The Company’s first report on compliance with Section 404 was furnished in connection with the GI Dynamics financial statements for the year ended December 31, 2014. As a former emerging growth company and a current smaller reporting company, the Company has been and currently is exempted from the requirement to include an external auditor opinion on the Company’s internal controls in its filings. GI Dynamics continues to update, document and evaluate its internal control over financial reporting to the requirements of Section 404.

The Company’s Certifying Officers are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.

Internal control over financial reporting is a process designed by, or under the supervision of, the Certifying Officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.  It is a process that involves human diligence and compliance and is subject to lapses in judgment or breakdowns resulting from human failures.  Internal control over financial reporting also can be circumvented by collusion or improper management override.  While process safeguards can reduce risks, because of inherent limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company, under the supervision and with the participation of the Certifying Officers, has evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 20192020 based upon the framework in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on such evaluations, the Certifying Officers have concluded that the Company’s internal control over financial reporting was effective as of December 31, 2019.2020.

Changes in Internal Control Over Financial Reporting 

As required by Rule 13a-15(d) of the Exchange Act, the Certifying Officers conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The evaluation performed by the Certifying Officers resulted in a conclusion that no such changes occurred. In the third quarter, a material weakness was identified related to reconciliation of accrued interest which has been address by changing the mandatory review and approval processes related to period closure and journal entries, including those related to accrued interest. Also in the third quarter, a material weakness was identified related to stock based compensation charges relating to an inaccurate interpretation of a contractual vesting clause which has been addressed by implementing a formal legal review of contracts whose terms may impact financial reporting, including stock award vesting and cancellation clauses.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Certain information required by this Item 10 relating to the Company’s directors and executive officers is incorporated by reference herein to the Company’s Proxy Statement to be filed with the SEC in connection with its 20202021 Annual Meeting of Stockholders or an amendment to this report filed under cover of Form 10-K/A not later than 120 days after the end of the fiscal year ended December 31, 2019.2020.

Code of Business Conduct and Ethics

GI Dynamics has adopted a code of business conduct and ethics applicable to directors, executive officers and all other employees. A copy of that code is available on the Company’s corporate website at http://www.gidynamics.com. Any amendments to the code of business conduct and ethics, and any waivers thereto involving the Company executive officers, also will be available on the corporate website. A printed copy of these documents will be made available upon request. The content on the Company website is not incorporated by reference into this Annual Report on Form 10-K.

Directors of the Registrant

The following table sets forth the name, age and position of each of the Company’s directors as ofat March 2, 2020:11, 2021:

 All three directors are members of the audit committee, the compensation committee, and the nominating and corporate governance committee. At March 11, 2021, none of the committees have elected a specific chairperson.

Daniel J. MooreMark Lerdal has served as a directorthe Chairman of the Board of Directors of GI Dynamics since 2014,August 2020. Mr. Lerdal’s extensive knowledge and experience as vice-chairman from March 2015 to April 2016a board director in financial and chairman since May 2016. Mr. Moore’s extensive experience in domesticbusiness development, as well as a proven track record leading multiple mergers and international sales, operations and executive management in global medical device manufacturers and years of service on other boardsacquisitions, makes him qualified to serve on the Company’s board of directors.

Mr. Moore has served as president, chief executive officer and director of Cyberonics,Lerdal founded KC Holdings, Inc., a medical technology company with core expertise in neuromodulation, from 2007formed to October 2015. From 1989 to 2007,take KENETECH Corporation private through a management buyout. Mr. Moore held positions in sales, marketing, and senior management in the U.S. and in Europe at Boston Scientific Corporation, a diverse maker of minimally invasive medical products. His last position at Boston Scientific was President, International Distributor Management. Prior to that role, heLerdal previously held the position as President and CEO of President, Inter-Continental,KENETECH Corporation, one of the fourthworld’s largest business unitdeveloper, constructor and operator of Boston Scientific, with more than 1,000 global employees and revenues exceeding $700 million. Mr. Moore previously held senior management positions at several Boston Scientific U.S. and international divisions.wind energy plants.

Mr. MooreLerdal currently serves as the chairman of LivaNova PLC (the company resulting from the merger of Sorin S.p.A. and Cyberonics, Inc.), chairman of ViewRay, a memberChairman of the boardBoard for Leaf Clean Energy, Element Markets, LLC and Empower Energies, Inc., and sits on the Board of directorsDirectors for the Epilepsy Foundation of America,Southern Current, Allied Minds, PLC (LSE:ALM), and acts as a memberconsultant to Northleaf Capital Partners. Mr. Lerdal previously served on the Board of the boards or advisory boards for Brainscope, BioHouston,Directors to Onsite Energy Corporation, Medley Capital Corporation, Trading Emissions, PLC, TerraForm Power, Inc. and the WeldonTerraForm Global, Inc.

Mr. Lerdal graduated Cum Laude from Northwestern University School of Biomedical Engineering at Purdue University. Past board positions include Smiling Kids, Inc., the Epilepsy Foundation of Texas (past-Chair), the Epilepsy Foundation of Texas — Houston (past-President), the Medical Device Manufacturers Association (past-Chair), Cyberonics, Inc., Topera, Inc. (acquired by Abbott) and TriVascular Technologies, Inc. (acquired by Endologix).

Mr. Moore holds a B.A. from Harvard UniversityLaw and earned an MBAhis Bachelor of Arts in Economics from BostonStanford University.

Timothy J. Barberich

Ginger Glaser has been a director of GI Dynamics since June 2011. Mr. Barberich has nearly 40 years’October 2020. Ms. Glaser’s 25 years of quality and regulatory experience, in pharmaceutical andproven leadership of successful medical device companies,organizations, as well as her breadth of knowledge in technical, sales, marketingclinical affairs and management positions, including as chief executive officer and chairman of the board. Mr. Barberich is the founder and former president, chief executive officer and chairman of Sepracor, Inc., a NASDAQ-listed-pharmaceutical company based in Massachusetts, which was acquired by Dainippon Sumitomo Pharma Co., Ltd. in 2009. Mr. Barberich founded Sepracor in 1984 and served as its chief executive officer from 1984 to 2007 and chairman of the board from 1990 to 2007. From 2007 to 2008, Mr. Barberich served as executive chairman of Sepracor and then chairman of the board from 2008 to 2009. Mr. Barberich led Sepracor through its early-stage research and development, product approvals, commercialization, private financings and initial public offering, partnerships with major companies, several successful spin-outs and achievement of revenues in excess of $1 billion. Prior to founding Sepracor, Mr. Barberich spent 10 years as a senior executive at Millipore Corporation, a company that provides separations products to the life science research, pharmaceutical, biotechnology and electronic markets. Mr. Barberich brings to the Company’s board the knowledge and experience of leading a company in the health care industry through every stage of its life cycle. GI Dynamics believes this experience and familiarity with the types of risks that the Company may face, together with his broad medical device and pharmaceutical industry experience, makes Mr. Barberich uniquely suited to serve on the Company’s board.

Mr. Barberich is currently chairman and CEO of BioNevia Pharmaceuticals, Inc., a director of Verastem Oncology, a NASDAQ-listed biotechnology company, TScan and Frequency Therapeutics, both privately funded biotechnology companies. Mr. Barberich was formerly a director of Inotek Pharmaceuticals, a NASDAQ-listed biotechnology company, Neurovance, Inc., a privately held biotechnology company, HeartWare International, Inc., a NASDAQ-listed medical device company, Tokai Pharmaceuticals, Inc., a NASDAQ-listed biopharmaceutical company, MirImmune Inc., which was acquired in 2016, BioSphere Medical, Inc., a NASDAQ-listed biotechnology company, Gemin X Biotechnologies, Inc. and Resolvyx Pharmaceuticals, which were acquired in 2011 and 2010, respectively, and Virucon, a publicly traded biotechnology company.

Mr. Barberich holds a Bachelor of Science degree in Chemistry from Kings College in Pennsylvania and has taken graduate courses from the School of Chemistry at Rutgers University.

Juliet Thompson has been a director of GI Dynamics since August 22, 2017. Ms. Thompson also assumed the role of chair of the Company’s audit committee. Ms. Thompson has spent approximately 20 years working as an investment banker and strategic advisor to healthcare companies in Europe. Ms. Thompson’s extensive experience in investment banking, including capital raising and strategic initiatives,engineering makes her qualified to serve on the Company’s board of directors.

Since March 2015, Ms. ThompsonGlaser currently is the Principal for G2 Consulting Services and the Chief Technology Officer for Monteris Medical, where she previously held vice president positions. Ms. Glaser held vice president roles with Boston Scientific and American Medical Systems, prior to its acquisition by Boston Scientific.

Ms. Glaser has served ona strong understanding of FDA processes and culture. She has led industry-wide task forces and helped numerous organizations obtain global regulatory approvals, including “first in the board of Nexstim Limited, a medical technology company listed on Nasdaq First North Finlandworld” achievements.

Ms. Glaser graduated Cum Laude from Texas A&M University, where she earned her B.S. in Bioengineering and Sweden. Prior to that, Ms. Thompson led the European healthcare practice at Stifel Financial Corp., a diversified financial services holding company, serving as a partner from October 2013 to April 2015. In 2003, Ms. Thompson co-founded Code Securities, a healthcare investment banking firm that was purchased by Nomura and renamed Nomura Code Securities Limited (“Nomura Code”)M.S. in 2005 and served as Head of Corporate Finance and as a member of the board of Nomura Code until 2013. She is also currently a non-executive director of Vectura PLC, a company listed on the London Stock Exchange plc, and Novacyt S.A., a French-based company whose shares are admitted to trade on AIM, Ms. Thompson is a member of the Institute of Chartered Accountants in England and Wales (ACA) and holds a BSc degree in Economics from the University of Bristol. Her experience also includes roles at WestLB Panmure, ICI PLC, Deloitte and Touche and HM Treasury.Biomedical Engineering.

Oern R. Stuge, M.D.Joseph Virgilio has served asbeen a director and the Company’s chief executive officer since November 2020. Mr. Virgilio’s more than 20 years of GI Dynamics since his appointment in January 2017. Dr. Stuge’s extensivesales, marketing, and general management experience in domestic and international sales, management and operations in a globalthe medical device manufacturerindustry makes him qualified to serve on the Company’s board of directors. Mr. Virgilio possesses a proven track record of aggressive revenue growth through the development and execution of strategic sales and marketing plans with demonstrated abilities to recruit, train, and motivate a highly effective and specialized cross-functional team. His areas of expertise also include GPO/IDN contracting, organizational development and restructuring, corporate partnerships, and distribution strategies. Additionally, Mr. Virgilio possesses broad experience leading organizational turn-around and integration activities.

Dr. Stuge hasPrior to joining GI Dynamics, Mr. Virgilio served as an executivePresident and General Manager for Amann Girrbach, a global leader in variousdental CAD/CAM technology Mr. Virgilio has also held the position of Vice President of Sales, The Americas at Surgical Specialties Corporation, as well as Vice President of Sales and Global Marketing at Aptus Endosystems (acquired by Medtronic). Mr. Virgilio spent the early part of his medical device health care and life sciences companies over the last thirty years. Since January 2011, Dr. Stuge has been Chairman of Orsco Lifesciences AG,career at Boston Scientific followed by almost a management firm that specializes in medical technology through which he supports several companies. Prior to that, Dr. Stuge served in various positions, including as Senior Vice-President,decade at Medtronic Inc.,in roles of increasing responsibility.

Mr. Virgilio holds a Bachelor of Arts degree from May 1998 to December 2009. Dr. Stuge is currently Chairman of Mainstay Medical Limited, a Euronext Paris-listedColgate University and Irish Stock Exchange-listed medical devices company and Luminas Limited, formerly a NASDAQ-listed medical company. Dr. Stuge is chairman of the board of OrthoD Ltd. and serves on the board of several private companies including Balt Extrusion SAS, Pulmonx International SA, and Phagenesis Limited. Furthermore, until December 2016, Dr. Stuge served on the board of Bonesupport AB, a private medical technology company.

Dr. Stuge received an M.D.earned continued education credits from the University of Oslo, Norway, an M.B.A. from IMD and an INSEAD Certification in Corporate Governance.

Praveen Tyle, Ph.D.has served as a director since February 2020. Dr. Tyle’s executive research and development leadership experience, including within diabetes and obesity, and significant mergers and acquisitions and business development and licensing experience makes him qualified to serve on the Company’s board of directors.

Since May 2016, Dr. Tyle has served as Executive Vice President of Research and Development of Lexicon Pharmaceuticals. Dr. Tyle was previously a member of the executive management team at Osmotica Pharmaceutical Corp., serving as President and Chief Executive Officer from January 2013 through April 2016 and as Executive Vice President and Chief Scientific Officer from August 2012 to December 2012. He is also a member of the board of Orient EuroPharma Co., Ltd. of Taiwan. Dr. Tyle has nearly 30 years of experience in the pharmaceutical industry with the majority of his tenure in senior executive leadership positions in areas of research and development, manufacturing, quality, business development and operations. Prior to joining Osmotica Pharmaceutical Corp., Dr. Tyle served as Executive Vice President (from January 2012 to August 2012) and Chief Scientific Officer (from October 2011 to August 2012) for the United States Pharmacopeia, or USP. Prior to joining USP, Dr. Tyle from 2008 to 2011, served as the Senior Vice President and Global HeadPennsylvania, Wharton School of Business Development and Licensing at Novartis Consumer Health from March 2009 to September 2011. At Novartis Consumer Health, Dr. Tyle also served as Senior Vice President & Global Head of Research and Development from March 2009 to February 2010. Dr. Tyle holds a doctorate in pharmaceutics and pharmaceutical chemistry from the Ohio State University and a BS in Pharmacy (honors) from the Institute of Technology, Banaras Hindu University in India.

Australian Disclosure Requirements

Because GI Dynamics is listed on the ASX, it is required to comply with various disclosure requirements as set out in the ASX Listing Rules. The following information is provided to comply with the ASX Listing Rules and is not intended to fulfill SEC information required by Part IIINorth Carolina, Chapel Hill, Kenan-Flagler School of this Annual Report on Form 10-K.Business.

Overview

GI Dynamics securities are listed for quotation in the form of CDIs on the ASX and trade under the symbol “GID.AX” Each share of GI Dynamics common stock is equivalent to fifty CDIs. The stockholder information below was applicable as at March 12, 2020.

GI Dynamics share capital was as follows: