Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 11, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Entity Registrant Name | RESHAPE LIFESCIENCES INC. | |
Title of 12(b) Security | Common stock | |
Trading Symbol | RSLS | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Interactive Data Current | Yes | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 5,586,554 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001371217 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 1,857 | $ 2,935 |
Restricted cash | 50 | 50 |
Accounts and other receivables (net of allowance for doubtful accounts of $893 and $709 respectively) | 2,951 | 4,096 |
Inventory (Note 3) | 1,988 | 1,317 |
Prepaid expenses and other current assets (Note 3) | 1,304 | 1,711 |
Total current assets | 8,150 | 10,109 |
Property and equipment, net | 431 | 16 |
Operating lease right-of-use assets (Note 6) | 540 | 758 |
Other intangible assets, net | 27,424 | 28,674 |
Other assets | 46 | 99 |
Total assets | 36,591 | 39,656 |
Current liabilities: | ||
Accounts payable | 3,761 | 4,263 |
Accrued and other liabilities (Note 3) | 3,257 | 3,821 |
Warranty liability, current | 383 | 105 |
Debt, current portion, net of deferred financing costs | 6,558 | 1,909 |
Operating lease liabilities, current (Note 6) | 309 | 291 |
Total current liabilities | 14,268 | 10,389 |
Debt, noncurrent portion | 3,204 | 2,728 |
Operating lease liabilities, noncurrent (Note 6) | 243 | 477 |
Warranty liability, noncurrent | 1,091 | 1,253 |
Deferred income taxes | 702 | 702 |
Total liabilities | 19,508 | 15,549 |
Commitments, contingencies (Note 12) | ||
Stockholders’ equity: | ||
Common stock, $0.001 par value; 275,000,000 shares authorized at September 30, 2020 and December 31, 2019; 5,586,554 and 391,739 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 5 | |
Additional paid-in capital | 523,442 | 517,311 |
Accumulated deficit | (506,291) | (493,197) |
Accumulated other comprehensive loss | (74) | (8) |
Total stockholders’ equity | 17,083 | 24,107 |
Total liabilities and stockholders’ equity | 36,591 | 39,656 |
Series B convertible preferred stock | ||
Stockholders’ equity: | ||
Preferred stock, 5,000,000 shares authorized: | ||
Series C convertible preferred stock | ||
Stockholders’ equity: | ||
Preferred stock, 5,000,000 shares authorized: | $ 1 | $ 1 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Allowance for bad debts | $ 893 | $ 709 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 275,000,000 | 275,000,000 |
Common stock, shares issued | 5,586,554 | 5,586,554 |
Common stock, shares outstanding | 391,739 | 391,739 |
Series B convertible preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, issued | 3 | 3 |
Preferred stock outstanding | 3 | 3 |
Series C convertible preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, issued | 95,388 | 95,388 |
Preferred stock outstanding | 95,388 | 95,388 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Condensed Consolidated Statements of Operations | ||||
Revenue | $ 3,602 | $ 3,515 | $ 8,092 | $ 11,039 |
Cost of revenue | 1,321 | 1,413 | 3,471 | 3,849 |
Gross profit | 2,281 | 2,102 | 4,621 | 7,190 |
Operating expenses: | ||||
Sales and marketing | 1,160 | 950 | 3,446 | 3,338 |
General and administrative | 2,434 | 4,412 | 7,809 | 14,237 |
Research and development | 859 | 858 | 2,619 | 2,874 |
Impairment of intangible assets | 6,588 | |||
Loss on litigation settlement | 1,500 | 1,500 | ||
Total operating expenses | 4,453 | 7,720 | 13,874 | 28,537 |
Operating loss | (2,172) | (5,618) | (9,253) | (21,347) |
Other expense (income), net: | ||||
Interest expense, net | 739 | 74 | 1,632 | 390 |
Loss on extinguishment of debt | 2,435 | 2,435 | 71 | |
Warrant expense | 22,564 | 26,821 | ||
Gain on foreign currency exchange | (128) | (229) | (118) | (229) |
Other, net | 727 | 1,336 | ||
Loss before income tax provision | (5,218) | (28,754) | (13,202) | (49,736) |
Income tax benefit | (39) | 0 | (108) | (586) |
Net loss attributable to common shareholders | $ (5,179) | $ (28,754) | $ (13,094) | $ (49,150) |
Net loss per share - basic and diluted: | ||||
Net loss per share - basic and diluted (in dollars per share) | $ (0.74) | $ (106.44) | $ (1.89) | $ (235.42) |
Shares used to compute basic and diluted net loss per share | 6,968,221 | 270,136 | 6,913,188 | 208,777 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Condensed Consolidated Statements of Comprehensive Loss | ||||
Net loss | $ (5,179) | $ (28,754) | $ (13,094) | $ (49,150) |
Other comprehensive loss, net of tax: | ||||
Foreign currency translation adjustments | (45) | (9) | (66) | (9) |
Other comprehensive loss, net of tax | (45) | (9) | (66) | (9) |
Comprehensive loss | $ (5,224) | $ (28,763) | $ (13,160) | $ (49,159) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Preferred StockSeries B convertible preferred stock | Preferred StockSeries C convertible preferred stock | Preferred StockSeries E convertible preferred stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total |
Balance at Dec. 31, 2018 | $ 1 | $ 450,652 | $ (418,990) | $ 31,663 | ||||
Balance (in shares) at Dec. 31, 2018 | 159 | 95,388 | 73,092 | |||||
Changes in Stockholders' (Deficit) Equity | ||||||||
Net loss | (49,150) | (49,150) | ||||||
Other comprehensive income (loss), net of tax | $ (9) | (9) | ||||||
Stock-based compensation expense | 1,486 | 1,486 | ||||||
Issuance of warrants | 131 | 131 | ||||||
Institutional exercise of warrants | 478 | 478 | ||||||
Institutional exercise of warrants (Shares) | 200,202 | |||||||
Warrant adjustment | (312) | (312) | ||||||
Conversion of common stock into convertible preferred stock | $ 12 | (12) | ||||||
Conversion of common stock into convertible preferred stock (in shares) | 1,192,000 | (9,933) | ||||||
Conversion of convertible preferred stock into common stock | $ (12) | 12 | ||||||
Conversion of convertible preferred stock into common stock (in shares) | (156) | (1,192,000) | 9,933 | |||||
Issuance of common stock upon exercise of warrants, net of issuance costs | 51 | 51 | ||||||
Issuance of common stock upon exercise of warrants, net of issuance costs (in shares) | 80,500 | |||||||
Balance at Sep. 30, 2019 | $ 1 | 452,486 | (468,140) | (9) | (15,662) | |||
Balance (in shares) at Sep. 30, 2019 | 3 | 95,388 | 353,794 | |||||
Balance at Jun. 30, 2019 | $ 1 | 452,777 | (439,386) | 13,392 | ||||
Balance (in shares) at Jun. 30, 2019 | 3 | 95,388 | 237,544 | |||||
Changes in Stockholders' (Deficit) Equity | ||||||||
Net loss | (28,754) | (28,754) | ||||||
Other comprehensive income (loss), net of tax | (9) | (9) | ||||||
Stock-based compensation expense | (497) | (497) | ||||||
Institutional exercise of warrants | 150 | 150 | ||||||
Institutional exercise of warrants (Shares) | 69,167 | |||||||
Issuance of common stock upon exercise of warrants, net of issuance costs | 56 | 56 | ||||||
Issuance of common stock upon exercise of warrants, net of issuance costs (in shares) | 47,083 | |||||||
Balance at Sep. 30, 2019 | $ 1 | 452,486 | (468,140) | (9) | (15,662) | |||
Balance (in shares) at Sep. 30, 2019 | 3 | 95,388 | 353,794 | |||||
Balance at Dec. 31, 2019 | $ 1 | 517,311 | (493,197) | (8) | 24,107 | |||
Balance (in shares) at Dec. 31, 2019 | 3 | 95,388 | 391,739 | |||||
Changes in Stockholders' (Deficit) Equity | ||||||||
Net loss | (13,094) | (13,094) | ||||||
Other comprehensive income (loss), net of tax | (66) | (66) | ||||||
Stock-based compensation expense | 1,029 | 1,029 | ||||||
Issuance of warrants | 4,292 | 4,292 | ||||||
Institutional exercise of warrants | $ 5 | 605 | 610 | |||||
Institutional exercise of warrants (Shares) | 5,085,834 | |||||||
Cashless exercise of warrants (Shares) | 58,981 | |||||||
Common stock issued for professional services | 205 | 205 | ||||||
Common stock issued for professional services (Shares) | 50,000 | |||||||
Balance at Sep. 30, 2020 | $ 1 | $ 5 | 523,442 | (506,291) | (74) | 17,083 | ||
Balance (in shares) at Sep. 30, 2020 | 3 | 95,388 | 5,586,554 | |||||
Balance at Jun. 30, 2020 | $ 1 | $ 5 | 520,288 | (501,112) | (29) | 19,153 | ||
Balance (in shares) at Jun. 30, 2020 | 3 | 95,388 | 5,586,554 | |||||
Changes in Stockholders' (Deficit) Equity | ||||||||
Net loss | (5,179) | (5,179) | ||||||
Other comprehensive income (loss), net of tax | (45) | (45) | ||||||
Stock-based compensation expense | 255 | 255 | ||||||
Issuance of warrants | 2,899 | 2,899 | ||||||
Balance at Sep. 30, 2020 | $ 1 | $ 5 | $ 523,442 | $ (506,291) | $ (74) | $ 17,083 | ||
Balance (in shares) at Sep. 30, 2020 | 3 | 95,388 | 5,586,554 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (13,094) | $ (49,150) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation expense | 8 | 36 |
Amortization of intangible assets | 1,249 | 1,249 |
Impairment of intangible assets | 6,588 | |
Noncash interest expense | 175 | 880 |
Fair value adjustment to embedded derivative | (481) | |
Loss on extinguishment of debt | 2,435 | 71 |
Stock-based compensation | 1,029 | 1,486 |
Bad debt expense | 184 | 287 |
Provision for inventory excess and obsolescence | 244 | |
Warrant expense | 26,821 | |
Amortization of debt discount and deferred debt issuance costs | 1,392 | |
Deferred income tax benefit | (586) | |
Other noncash items | 21 | 31 |
Change in operating assets and liabilities: | ||
Accounts and other receivables | 962 | (2,343) |
Inventory | (915) | (204) |
Prepaid expenses and other current assets | 613 | (527) |
Accounts payable and accrued liabilities | (1,260) | 2,986 |
Warranty liability | 116 | |
Other | 53 | (23) |
Net cash used in operating activities | (6,788) | (12,879) |
Cash flows from investing activities: | ||
Capital expenditures | (230) | |
Cash used in investing activities: | (230) | |
Cash flows from financing activities: | ||
Proceeds from issuance of subordinated convertible debentures | 2,000 | |
Payments of financing costs | (59) | (21) |
Repayment of subordinated convertible debentures | (2,200) | |
Proceeds from sale and issuance of equity securities | 15,083 | |
Payments of equity issuance costs | (44) | |
Proceeds from institutional exercise of warrants | 610 | 239 |
Proceeds from credit agreement | 4,500 | |
Proceeds from PPP loan | 955 | |
Net cash provided by financing activities | 6,006 | 15,057 |
Effect of currency exchange rate changes on cash and cash equivalents | (66) | (9) |
Net decrease in cash, cash equivalents and restricted cash | (1,078) | 2,169 |
Cash, cash equivalents and restricted cash at beginning of period | 2,985 | 5,548 |
Cash, cash equivalents and restricted cash at end of period | 1,907 | 7,717 |
Noncash investing and financing activities: | ||
Relative fair value of warrants classified as debt issuance costs | 1,393 | |
Fair value of warrants included as a component of loss on extinguishment of debt | 2,899 | |
Capital expenditures accruals | $ 193 | |
Conversion of common stock to convertible preferred stock | $ (1) |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2020 | |
Basis of Presentation | |
Basis of Presentation | (1) Basis of Presentation The accompanying interim condensed consolidated financial statements and related disclosures of Reshape Lifesciences Inc. (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on April 30, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted. In the opinion of management, the interim consolidated condensed financial statements reflect all adjustments considered necessary for a fair statement of the interim periods. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. Reverse Stock Splits During the year ended December 31, 2019, the Company’s board of directors and stockholders approved the following reverse stock split: · 1-for-120 reverse split of the Company ’ s outstanding common stock that became effective after the close of market on November 11, 2019. In addition, the Company ’ s certificate of incorporation was amended to change the common stock and preferred stock par value from $0.01 per share to $0.001 per share. The reverse stock split in 2019 did not change the number of common or preferred shares authorized by the Company’s certificate of incorporation. All par value, share and per-share amounts have been retroactively adjusted to reflect the reverse stock split for all periods presented. Fair Value of Financial Instruments The carrying amounts of cash equivalents, accounts receivable, accounts payable and certain accrued and other liabilities approximate fair value due to their short-term maturities. Refer to Note 5 regarding the fair value of debt instruments and Note 8 regarding fair value measurements and inputs of warrants. Net Loss Per Share The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented: September 30, 2020 2019 Stock options 46 155 Convertible preferred stock 1,288 1,288 Warrants 9,483,446 13,647,740 Recent Accounting Pronouncements New accounting standards adopted by the Company in 2020 are discussed below or in the related notes, where appropriate. In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements and is intended to improve the effectiveness of disclosures, including the consideration of costs and benefits. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The adoption of this guidance did not have a material impact on the Company’s financial statements. New accounting standards not yet adopted are discussed below. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) : Measurement of Credit Losses on Financial Instruments, which is intended to provide financial statement users with more useful information about expected credit losses on financial assets held by a reporting entity at each reporting date. In May 2019, the FASB issued ASU No. 2019-05, which amended the new standard by providing targeted transition relief. The new guidance replaces the existing incurred loss impairment methodology with a methodology that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all expected credit losses. In November 2019, the FASB issued ASU No. 2019-11, which amended the new standard by providing additional clarification. This guidance is effective for the fiscal years and interim periods within those years beginning after December 15, 2022. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements. |
Liquidity and Management_s Plan
Liquidity and Management’s Plans | 9 Months Ended |
Sep. 30, 2020 | |
Liquidity and Management’s Plans | |
Liquidity and Management’s Plans | (2) Liquidity and Management’s Plans The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company currently does not generate revenue sufficient to offset operating costs and anticipates such shortfalls to continue in the short-term. The Company’s history of operating losses and limited cash resources and lack of certainty regarding obtaining significant third-party reimbursement of its products, raise substantial doubt about its ability to continue as a going concern. As of September 30, 2020 the Company had net negative working capital of approximately $6.1 million. The Company’s principal source of liquidity as of September 30, 2020 consisted of approximately $1.9 million of cash and cash equivalents and restricted cash, and $3.0 million of accounts receivable. The Company’s anticipated operations include plans to (i) continue to integrate the sales and operations of the Company with the Lap-Band product line, (ii) continue development of the ReShape Vest, (iii) seek opportunities to leverage the Company’s intellectual property portfolio and custom development services to provide third-party sales and licensing opportunities, and (iv) explore and capitalize on synergistic opportunities to expand our portfolio and offer future minimally invasive treatments and therapies in the obesity continuum of care. The Company believes that it has the flexibility to manage the growth of its expenditures and operations depending on the amount of available cash flows, which could include reducing expenditures for marketing, clinical and product development activities. However, the Company will ultimately need to achieve sufficient revenues from product sales and obtain additional equity or debt financing to support its operations. Management is currently pursuing various funding options, including seeking additional equity or debt financing as well as a strategic merger or other transaction to obtain additional funding to support the expansion of Lap-Band product sales and to continue the development of, and to successfully commercialize, the ReShape Vest. While the acquisition of the Lap-Band product line does provide incremental revenues and cash flows to the Company, total expenses, including the cost to support the clinical trials of the ReShape Vest, are expected to exceed internally generated cash flows for the foreseeable future. While there can be no assurance that the Company will be successful in its efforts, the Company has a long history of raising equity financing to fund its development activities. Should the Company be unable to obtain adequate financing in the near term, the Company’s business, result of operations, liquidity and financial condition would be materially and negatively affected, and the Company would be unable to continue as a going concern. Additionally, there can be no assurance that, assuming the Company is able to strengthen its cash position, it will achieve sufficient revenue or profitable operations to continue as a going concern. COVID-19 Risk and Uncertainties and CARES Act Additionally, on January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally and on March 13, 2020, the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. These mandated business closures have at times included the cessation of non-elective surgeries in Australia, Europe and the United States for all but emergency procedures. As a result of these mandates, on April 16, 2020, the Company implemented various short-term cost reductions and cash flow improvement actions, such as reducing the compensation for executives, management and key employees and decreasing operating expenses where possible. In addition, the Company also identified temporary headcount reductions and made the decision to furlough a portion of its workforce. During the second quarter of 2020, the mandated closures began to ease in many areas throughout the world and within the United States. As a result of this, elective surgeries started back up again through various parts of the world, which led to improved sales progressing through the third quarter. Even after the COVID-19 outbreak has subsided, the Company may continue to experience materially adverse impact on its financial condition and results of operation. Additionally, on June 15, 2020, the Company ended the temporary pay reductions and the furloughed employees returned to work. The full impact of the COVID-19 outbreak continues to evolve and it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce and has taken actions to mitigate the impact including among other things, temporary reductions in pay, and furloughs of certain positions along with deferrals in payment for cash preservation. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020. On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act established the Paycheck Protection Program (“PPP”) under which the Company received a PPP loan described in more detail in Note 5 below. We continue to examine the impact that the CARES Act may have on our business and the PPP loan. |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | 9 Months Ended |
Sep. 30, 2020 | |
Supplemental Balance Sheet Information | |
Supplemental Balance Sheet Information | (3) Supplemental Balance Sheet Information Components of selected captions in the condensed consolidated balance sheets consisted of the following: Inventory: September 30, December 31, 2020 2019 Raw materials $ 137 $ — Sub-assemblies 827 — Finished goods 1,024 1,317 Total inventory $ 1,988 $ 1,317 Prepaid expenses and other current assets: September 30, December 31, 2020 2019 Prepaid contract research organization expenses $ 580 $ 1,356 Prepaid insurance 431 190 Other 293 165 Total prepaid expenses and other current assets $ 1,304 $ 1,711 Accrued and other liabilities: September 30, December 31, 2020 2019 Accrued professional services $ 599 $ 1,432 Payroll and benefits 1,526 1,021 Taxes 200 373 Equity transaction related liability — 211 Customer deposits 357 202 Accrued insurance premium — 87 Other 575 495 Total accrued and other liabilities $ 3,257 $ 3,821 |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Intangible Assets | |
Intangible Assets | (4) Intangible Assets Indefinite-lived intangible assets consist of in-process research and development (“IPR&D”) for the ReShape Vest recorded in connection with the Company’s acquisition of BarioSurg, Inc. The Company’s finite-lived intangible assets consists of developed technology, trademarks and tradenames, and covenant not compete. The estimated useful lives of these finite-lived intangible assets ranges from 3 to 10 years. The amortization expenses for both the three months ended September 30, 2020 and 2019 was $0.4 million, and for both the nine months ended September 30, 2020 and 2019 was $1.2 million. During the second quarter of 2020, the Company performed a qualitative impairment analysis of the IPR&D and finite-lived intangible assets and did not identify any impairment as a result of this analysis. Impairment of Intangible Assets – Second Quarter 2019 The Company has completed the feasibility study for the ReShape Vest and began clinical trials in Europe in 2018. During the second quarter of 2019, the Company performed a qualitative impairment analysis of the IPR&D. Due to delays in the clinical trials experienced during the first six months of 2019, the Company revised its expectations of when revenues would commence for the ReShape Vest, thus reducing the projected near-term future net cash flows related to the ReShape Vest. As a result, the Company performed a quantitative impairment analysis of the IPR&D and recorded a one-time nonrecurring impairment charge of $6.6 million, for the excess of the carrying value over the estimated fair value. The fair value of the IPR&D was estimated using an income approach using Level 3 assumptions which included discounting the revised projected future net cash flows to their present value, with a discount rate of 22.4%. The Company also assessed the recoverability of finite-lived intangible assets and did not identify any impairment as a result the performance of this analysis. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2020 | |
Debt | |
Debt | (5) Debt September 30, December 31, 2020 2019 Asset purchase consideration $ 4,813 $ 4,637 Credit agreement 4,500 — PPP Loan 955 — Total debt 10,268 4,637 Less: unamortized debt discount 506 — Less: current portion of debt 6,558 1,909 Debt, noncurrent portion $ 3,204 $ 2,728 CARES Act On April 24, 2020, the Company entered into a PPP Loan agreement with Silicon Valley Bank (“SVB”) under the PPP, which is part of the CARES Act administered by the United States Small Business Administration (“SBA”). As part of the application for these funds, the Company in good faith, has certified that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. Under this program, the Company received proceeds of $1.0 million from the PPP Loan. In accordance with the requirements of the PPP, the Company intends to use proceeds from the PPP Loan primarily for payroll costs, rent and utilities. The PPP Loan has a 1.00% interest rate per annum, matures on April 24, 2022 and is subject to the terms and conditions applicable to loans administered by the SBA under the PPP. Under the terms of PPP, all or certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act, which the Company continues to evaluate. Further, if despite the good-faith belief that given the Company’s circumstances all eligibility requirements for the PPP Loan were satisfied, if it is later determined the Company had violated any applicable laws or regulations or it is otherwise determined the Company was ineligible to receive the PPP Loan, it may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties. The Company continues to examine the impact that the CARES Act may have on its business. Currently the Company is unable to determine the impact that the CARES Act will have on its financial condition, results of operation or liquidity. Credit Agreement On March 25, 2020, the Company executed a credit agreement up to $3.5 million, with an institutional investor (the “Lender”), who holds warrants in connection with the June 2019 and September 2019 transactions. On the day of closing, the Company received $2.5 million and the additional $1.0 million may be drawn from time to time 30 days after the closing date but prior to five months after the closing date, in $500 thousand increments per draw. On June 23, 2020, the Company made the first additional draw of $500 thousand and on July 29, 2020 the second $500 thousand draw was made. On September 14, 2020, the Company and the Lender entered into an amendment to the credit agreement that increased the amount available under delayed draw term loans by $2.0 million. The Company borrowed $1.0 million of the available amount immediately and the remaining $1.0 million will be available in increments of least $500 thousand with at least 30 days between borrowings and issued an additional 1,200,000 Series G Warrants. The Company evaluated the accounting related to the amendment and in conjunction with the warrants issued. Based on this analysis the Company determined the agreements are substantially different and extinguished the original credit agreement and recorded the amended credit agreement as a new debt at a fair value of $3.9 million. As a result, the Company recorded a debt discount of approximately $0.6 million and a $2.4 million loss on extinguishment of debt which is comprised of the fair value of the warrants and unamortized debt issuance cost with the original credit agreement, offset by the debt discount. At September 30, 2020 there was approximately $0.5 million of unamortized debt discount. Pursuant to the amendment of the credit agreement, the maturity date of the loans are March 31, 2021 and the loans bear interest at LIBOR plus 2.5%. As required by the terms of this credit agreement, the lender exercised its warrants to purchase an aggregate of 5,085,834 shares of common stock with a current exercise price of $0.12 per warrant on April 15, 2020, in which the Company received net proceeds of $0.6 million. In addition, the Company issued to the lender 1,200,000 Series G warrants to purchase an aggregate of 1,200,000 shares of common stock. As an inducement to the Lender to enter into the amendment and make the additional loans contemplated thereby, the Company issued to the Lender an additional 1,200,000 Series G warrants dated September 14, 2020 to purchase an aggregate of 1,200,000 shares of common stock. The original Series G warrants were valued using the relative fair value basis and the amount was recorded as part of the debt issuance costs, see Note 8 for additional details. Asset Purchase Consideration Payable The asset purchase consideration payable related to the Company’s December 2018 acquisition of the Lap-Band product line from Apollo Endosurgery, Inc. (“Apollo”), was initially recorded at net present value using a discount rate of 5.1%. The asset purchase consideration payable was originally secured by a first security interest in substantially all of the Company’s assets, but that security interest terminated in accordance with its terms in October 2019. At September 30, 2020, the aggregate carrying value of the current and noncurrent asset purchase consideration payable of approximately $4.8 million, as adjusted for accretion of interest of approximately $0.5 million. Convertible Subordinated Debentures On March 29, 2019, the Company completed a private placement with certain healthcare focused institutional investors for the sale of secured subordinated original issue discount convertible debentures (“debentures”) for a purchase price of $2.0 million. The debentures had a maturity of June 28, 2019 and a face amount of $2.2 million, reflecting a 10% original issue discount. The Company recorded an additional debt discount and a derivative liability for the fair value of the bifurcated embedded conversion features discussed below. The initial carrying amount of the debentures, net of discounts and deferred financing costs, was approximately $1.5 million. The Company repaid the debentures on June 20, 2019 at their face amount of $2.2 million. The Company analyzed the conversion features embedded in the debentures and determined that bifurcation and liability classification was required under ASC 815 due to the variable number of shares issuable upon conversion. The fair value of the bifurcated embedded conversion features was determined to be $0.5 million as of the issuance date using a Monte Carlo model and primarily Level 3 inputs using a risk-free rate of 2.19%; probability of conversion of 98.0%; probability of repayment at each conversion of 2.0%; volatility of 161.74%; option-adjusted spread of 50.0%; and a discount for lack or marketability of 20.0%. Upon the closing of the Company’s equity financing and the Company’s planned use of a portion of the proceeds to repay the debentures, the fair value of the embedded derivative liability was reduced to zero as the conversion feature was no longer available. As the Company did not elect the fair value option for the debentures, the initial carrying amount of the debentures, net of discounts and deferred financing costs of $1.5 million, which was accreted to the face amount over the term to maturity. In connection with the financing, the Company amended the exercise price of warrants to purchase up to 8,000,000 shares of common stock held by the investors that were issued on November 28, 2018 from $1.50 per share to $0.01 per share. The value attributable to the exercise price reduction of $0.1 million was recorded in Warrant Expense and was estimated using the Black Scholes option pricing model using a risk-free rate of 2.2%, an expected term of 4.7 years, expected dividends of zero and expected volatility of 204.4%. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2020 | |
Leases | |
Leases | (6) Leases The Company has a noncancelable operating lease for office and warehouse space in San Clemente, California and noncancelable operating leases for certain office equipment that expire at various dates through 2022. The Company does not have any short-term leases or financing lease arrangements and the effects of any lease modifications have not been material. Certain of the Company’s equipment leases include variable lease payments that are adjusted periodically based on actual usage. Lease and non-lease components are accounted for separately. Operating lease costs was $0.1 million for both the three months ended September 30, 2020 and 2019, and $0.2 million and $0.4 million for the nine months ended September 30, 2020 and 2019, respectively. Variable lease costs were not material. Supplemental information related to operating leases is as follows: Balance Sheet Information at September 30, 2020 Operating lease ROU assets $ 540 Operating lease liabilities, current portion $ 309 Operating lease liabilities, long-term portion 243 Total operating lease liabilities $ 552 Cash Flow Information for the Nine Months Ended September 30, 2020 Cash paid for amounts included in the measurement of operating leases liabilities $ 242 Maturities of operating lease liabilities were as follows: Twelve months ending September 30, 2021 $ 330 2022 248 2023 — Total lease payments 578 Less: imputed interest 26 Total lease liabilities $ 552 Weighted-average remaining lease term at end of period (in years) 1.7 Weighted-average discount rate at end of period % |
Equity
Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity | |
Equity | (7) Equity June 2020 Cashless Exercise of Warrants for Common Stock On June 23, 2020, the Company issued 58,981 shares of common stock as a cashless exercise of warrants issued to the placement agents in connection with the June 2019 private placement with healthcare focused institutional investors. May 2020 Common Stock Issued for Professional Services On May 28, 2020, the Company issued 50,000 shares of common stock, having an aggregate fair value of $0.2 million for ongoing professional services. The $0.2 million was recorded as a prepaid asset and will be amortized over the minimum life of the agreement. April 2020 Exercise of Warrants for Common Stock As discussed in Note 5 above, in connection with the credit agreement, the lender exercised its Series C and Series F warrants to purchase an aggregate of 5,085,834 shares of common stock with a current exercise price of $0.12 per warrant on April 15, 2020, in which the Company received net proceeds of $0.6 million. June 2019 Issuance of Common Stock and Warrants On June 18, 2019, the Company completed a private placement with certain healthcare focused institutional investors for the sale of 130,000 shares of common stock at a purchase price of $2.40 per share and Series C pre-funded warrants to purchase 3,203,334 shares of common stock at a purchase price of $2.28 per share. The exercise price of each pre-funded warrant is $0.12 per share. The Company also issued Series A warrants to purchase 3,333,334 shares of common stock at an exercise price of $2.64 per share and Series B warrants to purchase 3,333,334 shares of common stock at an exercise price of $2.40 per share. Net proceeds from the private placement were $6.9 million after deducting placement agent fees and other transaction costs. In connection with the registered direct offering, the placement agent received warrants to purchase 233,334 shares of common stock at an exercise price of $3.00 per share. February 2019 Conversion of Common Stock into New Series of Convertible Preferred Stock On February 1, 2019, pursuant to an exchange agreement with Sabby Volatility Warrant Master Fund, Ltd. (“Sabby”) 9,993 shares of the Company’s common stock were exchanged for an aggregate of 1,192,000 shares of Series E Convertible Preferred Stock (“Series E Preferred Stock”), were issued in a noncash transaction. Each share of Series E Preferred Stock was convertible into one share of common stock at Sabby’s election pre-effect of the reverse stock split that occurred during November 2019. In April 2019, all shares of Series E Preferred Stock were converted into an equal number of shares of common stock. The November 2019 reverse stock split had no effect on this transaction. Conversion of Series B Convertible Preferred Stock into Common Stock During the nine months ended September 30, 2019, 156 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”) were converted into 1,040 shares of common stock. At September 30, 2020, the remaining 3 shares of Series B Preferred stock are convertible into 1,250 shares of common stock. |
Warrants
Warrants | 9 Months Ended |
Sep. 30, 2020 | |
Warrants. | |
Warrants | (8) Warrants On September 14, 2020, the Company issued 1,200,000 Series G Warrants to an institutional investor in connection with an amendment to the credit agreement. The Series G Warrants were valued at $2.9 million using the fair value approach at the time of issuance was recorded as a component of the loss on extinguishment of debt, see Note 5 above for details. The fair value of the Series G Warrants was determined using a Black Scholes option pricing model using a risk-free interest rate of 0.27%, an expected term of five years; expected dividends of zero and expected volatility of 101.1%. On March 25, 2020, the Company issued 1,200,000 Series G Warrants to an institutional investor in connection with the credit agreement, see Note 5 above for details. The Series G Warrants were valued at $1.4 million using the relative fair value approach at the time of issuance and was recorded as deferred debt issuance cost. The relative fair value of the Series G Warrants was determined using a Black Scholes option pricing model using a risk-free interest rate of 0.56%; an expected term of five years; expected dividends of zero and expected volatility of 97.00%. On September 23, 2019, the Company entered into a warrant exercise agreement with the holders of Series B warrants issued in the June 2019 private placement. The holders agreed to early exercise 3,333,334 Series B warrants in the private placement in exchange for 69,167 shares of common stock and 3,264,167 common stock equivalents in the form of Series F prefunded warrants. The net proceeds from the early exercise of Series B warrants were approximately $6.9 million, after deducting placement agent fees and other transaction costs. As an incentive for the warrant holders to exercise their Series B warrant in full, the warrant holders were issued new five-year series E warrants to purchase up to 3,333,334 unregistered shares of the Company’s common stock, in aggregate, at an exercise price of $6.00 per share, through a private placement. In connection with the registered direct offering, the placement agent received warrants to purchase 233,334 shares of common stock at an exercise price of $6.00 per share. |
Revenue Disaggregation and Oper
Revenue Disaggregation and Operating Segments | 9 Months Ended |
Sep. 30, 2020 | |
Revenue Disaggregation and Operating Segments | |
Revenue Disaggregation and Operating Segments | (9) Revenue Disaggregation and Operating Segments The Company conducts operations worldwide and has sales in the following regions: United States, Australia, Europe and Rest of World. For the three and nine months ended September 30, 2020 and 2019, the Company only sold the LAP-BAND products. The following table presents the Company’s revenue disaggregated by geography: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 United States $ 2,594 $ 3,143 $ 6,006 $ 10,219 Australia 307 372 725 820 Europe 637 — 1,273 — Rest of world 64 — 88 — Total net revenue $ 3,602 $ 3,515 $ $ *The next largest individual country outside the United States was United Kingdom for the three months ended September 30, 2020 which was 9.6% of total revenues, and Australia for the nine months ended September 30, 2020 which was 9.0% of total revenues. Australia was the next largest individual country outside the United States for both the three and nine months ended September 30, 2019 and was 10.5% and 7.2%, respectively, of total revenues. Operating Segments The Company’s operating segments currently consist of the Lap-Band segment and the ReShape Vest segment. These two operating segments are reported based on the financial information provided to the Chief Operating Decision Maker (the Chief Executive Officer, or “CODM”). The Company’s CODM evaluates segment performance based on gross profit, which currently only consists of LAP-BAND. The Company’s CODM does not use operating segment assets information to allocate resources or to assess performance of the operating segments and thus total segment assets have not been disclosed. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Taxes | |
Income Taxes | (10) Income Taxes The Company’s tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter the Company updates its estimate of the annual effective tax rate. The Company’s quarter tax provision, and quarterly estimate of annual effective tax rate, are subject to significant volatility due to several factors, including the Company’s ability to accurately predict pre-tax income and loss. During the three and nine months ended September 30, 2020 a $39 thousand and $108 thousand, respectively, tax benefit was recorded, primarily due to adjusted pre-tax income in Australia. No income tax expense or benefit was recorded for the three months ended September 30, 2019 due to the valuation of allowance on deferred tax assets. The Company recorded an income tax benefit of $0.6 million for the nine months ended September 30, 2019, in connection with the impairment of IPR&D, which resulted in a reduction in the deferred tax liability associated with the indefinite-lived intangible asset. In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Based on the level of historical losses, projections of losses in future periods and potential limitations pursuant to changes in ownership under Internal Revenue Code (“IRC”) Section 382, the Company provided a valuation allowance at both September 30, 2020 and December 31, 2019. |
Stock-based Compensation
Stock-based Compensation | 9 Months Ended |
Sep. 30, 2020 | |
Stock-based Compensation | |
Stock-based Compensation | (11) Stock-based Compensation Stock-based compensation expense related to stock options issued under the ReShape Lifesciences Inc. Second Amended and Restated 2003 Stock Incentive Plan (the “Plan”) and as inducement grants for the three and nine months ended September 30, 2020 and 2019 was as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Sales and marketing $ — $ (78) $ — $ 70 General and administrative 255 (420) 1,029 43 Research and development — 1 — 1,373 Total stock-based compensation expense $ 255 $ (497) $ 1,029 $ 1,486 As of September 30, 2020 there was approximately $0.5 million of total unrecognized compensation costs related to unvested stock option awards, which are to be recognized over a weighted-average period of 1.4 years. There were no stock options granted during both the three and nine months ended September 30, 2020 and 2019. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | (12) Commitments and Contingencies Litigation The Company is not currently a party to any material litigation and the Company is not aware of any pending or threatened litigation against it that could have a material adverse effect on the Company’s business, operating results or financial condition. The medical device industry in which the Company operates is characterized by frequent claims and litigations, including claims regarding patent and other intellectual property rights as well as improper hiring practices. As a result, the Company may be involved in various legal proceedings from time to time. Product Liability Claims The Company is exposed to product liability claims that are inherent in the testing, production, marketing and sale of medical devices. Management believes any losses that may occur from these matters are adequately covered by insurance, and the ultimate outcome of these matters will not have a material effect on the Company’s financial position or results of operations. The Company is not currently a party to any product liability litigation and is not aware of any pending or threatened product liability litigation that is reasonably possible to have a material adverse effect on the Company’s business, operating results or financial condition. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events | |
Subsequent Events | (13) Subsequent Events As part of the amendment to the credit agreement discussed in Note 5 above, the Company is permitted to make two additional delayed drawdowns. On November 13, 2020, the Company received the first additional draw of $500 thousand dollars. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Basis of Presentation | |
Basis of Presentation | Basis of Presentation The accompanying interim condensed consolidated financial statements and related disclosures of Reshape Lifesciences Inc. (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on April 30, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted. In the opinion of management, the interim consolidated condensed financial statements reflect all adjustments considered necessary for a fair statement of the interim periods. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. |
Reverse Stock Splits | Reverse Stock Splits During the year ended December 31, 2019, the Company’s board of directors and stockholders approved the following reverse stock split: · 1-for-120 reverse split of the Company ’ s outstanding common stock that became effective after the close of market on November 11, 2019. In addition, the Company ’ s certificate of incorporation was amended to change the common stock and preferred stock par value from $0.01 per share to $0.001 per share. The reverse stock split in 2019 did not change the number of common or preferred shares authorized by the Company’s certificate of incorporation. All par value, share and per-share amounts have been retroactively adjusted to reflect the reverse stock split for all periods presented. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of cash equivalents, accounts receivable, accounts payable and certain accrued and other liabilities approximate fair value due to their short-term maturities. Refer to Note 5 regarding the fair value of debt instruments and Note 8 regarding fair value measurements and inputs of warrants. |
Net Loss Per Share | Net Loss Per Share The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented: September 30, 2020 2019 Stock options 46 155 Convertible preferred stock 1,288 1,288 Warrants 9,483,446 13,647,740 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements New accounting standards adopted by the Company in 2020 are discussed below or in the related notes, where appropriate. In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements and is intended to improve the effectiveness of disclosures, including the consideration of costs and benefits. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The adoption of this guidance did not have a material impact on the Company’s financial statements. New accounting standards not yet adopted are discussed below. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) : Measurement of Credit Losses on Financial Instruments, which is intended to provide financial statement users with more useful information about expected credit losses on financial assets held by a reporting entity at each reporting date. In May 2019, the FASB issued ASU No. 2019-05, which amended the new standard by providing targeted transition relief. The new guidance replaces the existing incurred loss impairment methodology with a methodology that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all expected credit losses. In November 2019, the FASB issued ASU No. 2019-11, which amended the new standard by providing additional clarification. This guidance is effective for the fiscal years and interim periods within those years beginning after December 15, 2022. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Basis of Presentation | |
Schedule of anti-dilutive securities | September 30, 2020 2019 Stock options 46 155 Convertible preferred stock 1,288 1,288 Warrants 9,483,446 13,647,740 |
Supplemental Balance Sheet In_2
Supplemental Balance Sheet Information (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Supplemental Balance Sheet Information | |
Schedule of components of inventory | September 30, December 31, 2020 2019 Raw materials $ 137 $ — Sub-assemblies 827 — Finished goods 1,024 1,317 Total inventory $ 1,988 $ 1,317 |
Schedule of components of prepaid expenses and other current assets | September 30, December 31, 2020 2019 Prepaid contract research organization expenses $ 580 $ 1,356 Prepaid insurance 431 190 Other 293 165 Total prepaid expenses and other current assets $ 1,304 $ 1,711 |
Schedule of components of accrued and other liabilities | September 30, December 31, 2020 2019 Accrued professional services $ 599 $ 1,432 Payroll and benefits 1,526 1,021 Taxes 200 373 Equity transaction related liability — 211 Customer deposits 357 202 Accrued insurance premium — 87 Other 575 495 Total accrued and other liabilities $ 3,257 $ 3,821 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt | |
Summary of long term debt | September 30, December 31, 2020 2019 Asset purchase consideration $ 4,813 $ 4,637 Credit agreement 4,500 — PPP Loan 955 — Total debt 10,268 4,637 Less: unamortized debt discount 506 — Less: current portion of debt 6,558 1,909 Debt, noncurrent portion $ 3,204 $ 2,728 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases | |
Schedule of supplemental information related to operating leases | Balance Sheet Information at September 30, 2020 Operating lease ROU assets $ 540 Operating lease liabilities, current portion $ 309 Operating lease liabilities, long-term portion 243 Total operating lease liabilities $ 552 Cash Flow Information for the Nine Months Ended September 30, 2020 Cash paid for amounts included in the measurement of operating leases liabilities $ 242 |
Schedule of maturities of operating lease liabilities | Twelve months ending September 30, 2021 $ 330 2022 248 2023 — Total lease payments 578 Less: imputed interest 26 Total lease liabilities $ 552 Weighted-average remaining lease term at end of period (in years) 1.7 Weighted-average discount rate at end of period % |
Revenue Disaggregation and Op_2
Revenue Disaggregation and Operating Segments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue Disaggregation and Operating Segments | |
Schedule of revenue disaggregated by product and geography | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 United States $ 2,594 $ 3,143 $ 6,006 $ 10,219 Australia 307 372 725 820 Europe 637 — 1,273 — Rest of world 64 — 88 — Total net revenue $ 3,602 $ 3,515 $ $ *The next largest individual country outside the United States was United Kingdom for the three months ended September 30, 2020 which was 9.6% of total revenues, and Australia for the nine months ended September 30, 2020 which was 9.0% of total revenues. Australia was the next largest individual country outside the United States for both the three and nine months ended September 30, 2019 and was 10.5% and 7.2%, respectively, of total revenues. |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Stock-based Compensation | |
Schedule of stock-based compensation expense | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Sales and marketing $ — $ (78) $ — $ 70 General and administrative 255 (420) 1,029 43 Research and development — 1 — 1,373 Total stock-based compensation expense $ 255 $ (497) $ 1,029 $ 1,486 |
Basis of Presentation - Reverse
Basis of Presentation - Reverse Stock Splits (Details) | Nov. 11, 2019$ / shares | Sep. 30, 2020$ / shares | Dec. 31, 2019$ / shares |
Basis of Presentation | |||
Reverse stock split ratio | 120 | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.001 | $ 0.001 |
Basis of Presentation - Anti-di
Basis of Presentation - Anti-dilutive Securities (Details) - shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Stock options | ||
Anti-dilutive securities | ||
Anti-dilutive securities (in shares) | 46 | 155 |
Convertible preferred stock | ||
Anti-dilutive securities | ||
Anti-dilutive securities (in shares) | 1,288 | 1,288 |
Warrants | ||
Anti-dilutive securities | ||
Anti-dilutive securities (in shares) | 9,483,446 | 13,647,740 |
Liquidity and Management_s Pl_2
Liquidity and Management’s Plans (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Liquidity and Management’s Plans | ||||
Working capital | $ 6,100 | |||
Cash and cash equivalents and restricted cash | 1,907 | $ 2,985 | $ 7,717 | $ 5,548 |
Accounts receivable | $ 2,951 | $ 4,096 |
Supplemental Balance Sheet In_3
Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Supplemental Balance Sheet Information | ||
Raw materials | $ 137 | |
Sub-assemblies | 827 | |
Finished goods | 1,024 | $ 1,317 |
Total inventory | 1,988 | 1,317 |
Prepaid expenses and other current assets: | ||
Prepaid contract research organization expenses | 580 | 1,356 |
Prepaid insurance | 431 | 190 |
Other | 293 | 165 |
Total prepaid expenses and other current assets | 1,304 | 1,711 |
Accrued and other liabilities: | ||
Accrued professional services | 599 | 1,432 |
Payroll and benefits | 1,526 | 1,021 |
Taxes | 200 | 373 |
Equity transaction related liability | 211 | |
Customer deposits | 357 | 202 |
Accrued insurance premium | 87 | |
Other | 575 | 495 |
Total accrued and other liabilities | $ 3,257 | $ 3,821 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Indefinite-lived Intangible Assets [Line Items] | |||||
Amortization expense | $ 400 | $ 400 | $ 1,249 | $ 1,249 | |
Indefinite-lived intangible assets impairment | $ 6,600 | ||||
Discount rate | 22.40% | ||||
Minimum | |||||
Indefinite-lived Intangible Assets [Line Items] | |||||
Useful Life (years) | 3 years | ||||
Maximum | |||||
Indefinite-lived Intangible Assets [Line Items] | |||||
Useful Life (years) | 10 years |
Debt - Long term debt (Details)
Debt - Long term debt (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
Total debt | $ 10,268 | $ 4,637 |
Less: unamortized debt discount | 506 | |
Less: current portion of debt | 6,558 | 1,909 |
Debt, noncurrent portion | 3,204 | 2,728 |
Asset purchase consideration | ||
Debt Instrument [Line Items] | ||
Total debt | 4,813 | $ 4,637 |
Credit agreement | ||
Debt Instrument [Line Items] | ||
Total debt | 4,500 | |
PPP Loan | ||
Debt Instrument [Line Items] | ||
Total debt | $ 955 |
Debt - CARES Act (Details)
Debt - CARES Act (Details) - USD ($) $ in Thousands | Apr. 24, 2020 | Sep. 30, 2020 |
Debt Instrument [Line Items] | ||
Amount received | $ 955 | |
PPP Loan | ||
Debt Instrument [Line Items] | ||
Amount received | $ 1,000 | |
Discount rate (as a percent) | 1.00% |
Debt - Credit agreement (Detail
Debt - Credit agreement (Details) - USD ($) $ / shares in Units, $ in Thousands | Sep. 14, 2020 | Jul. 29, 2020 | Jun. 23, 2020 | Apr. 15, 2020 | Mar. 25, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 |
Short-term Debt [Line Items] | ||||||||
Amount received | $ 955 | |||||||
Debt Discount | $ 506 | 506 | ||||||
Loss on extinguishment of debt | 2,435 | 2,435 | $ 71 | |||||
Debt Instrument, Unamortized Discount | 506 | 506 | ||||||
Warrant exercise price (in dollars per share) | $ 0.12 | |||||||
Proceeds from exercise of warrants | $ 600 | 610 | $ 239 | |||||
Credit agreement | ||||||||
Short-term Debt [Line Items] | ||||||||
Agreement amount | $ 3,500 | |||||||
Amount received | $ 500 | $ 500 | 2,500 | |||||
Additional borrowing amount | $ 2,000 | $ 1,000 | ||||||
Closing period | 30 days | |||||||
Threshold period to draw additional amount | 5 months | |||||||
Maximum amount per draw | $ 500 | |||||||
Credit facility bear interest | 2.50% | |||||||
Number of shares in exchange of warrant exercise | 5,085,834 | |||||||
Warrant exercise price (in dollars per share) | $ 0.12 | |||||||
Proceeds from exercise of warrants | $ 600 | |||||||
Credit agreement | Series G Warrants | ||||||||
Short-term Debt [Line Items] | ||||||||
Warrants issued | 1,200,000 | |||||||
Number of shares in exchange of warrant exercise | 1,200,000 | |||||||
Credit agreement amendment | ||||||||
Short-term Debt [Line Items] | ||||||||
Amount received | 1,000 | |||||||
Additional borrowing amount | 1,000 | |||||||
Minimum amount per draw | $ 500 | |||||||
Minimum number of days between borrowings | 30 days | |||||||
New debt fair value | $ 3,900 | |||||||
Debt Discount | 600 | 500 | 500 | |||||
Loss on extinguishment of debt | 2,400 | |||||||
Debt Instrument, Unamortized Discount | $ 600 | $ 500 | $ 500 | |||||
Number of shares in exchange of warrant exercise | 1,200,000 | |||||||
Credit agreement amendment | Series G Warrants | ||||||||
Short-term Debt [Line Items] | ||||||||
Warrants issued | 1,200,000 |
Debt - Asset Purchase Considera
Debt - Asset Purchase Consideration Payable (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) | |
Long-term debt | ||
Total debt | $ 10,268 | $ 4,637 |
Secured debt | ||
Long-term debt | ||
Total debt | 4,800 | |
Accretion of interest | $ 500 | |
Secured debt | Discount rate | ||
Long-term debt | ||
Debt fair value measurement input (as a percent) | 5.1 |
Debt - Convertible Subordinated
Debt - Convertible Subordinated Debentures (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 20, 2019 | Mar. 29, 2019 | Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Apr. 15, 2020 | Mar. 28, 2019 | Nov. 28, 2018 |
Short-term debt | ||||||||
Purchase price | $ 2,000 | |||||||
Carrying amount | $ 1,500 | |||||||
Repayment of subordinated convertible debentures | 2,200 | |||||||
Loss on extinguishment of debt | $ (2,435) | $ (2,435) | (71) | |||||
Embedded derivative liability | $ 500 | |||||||
Fair value adjustment of embedded derivative | 481 | |||||||
Exercise price of warrants (in dollars per share) | $ 0.12 | |||||||
Warrant expense | $ 26,821 | |||||||
Level 3 | Risk-free interest rate | ||||||||
Short-term debt | ||||||||
Embedded Derivative Liability Measurement Input | 2.19 | |||||||
Level 3 | Expected volatility | ||||||||
Short-term debt | ||||||||
Embedded Derivative Liability Measurement Input | 161.74 | |||||||
Level 3 | Probability of conversion | ||||||||
Short-term debt | ||||||||
Embedded Derivative Liability Measurement Input | 98 | |||||||
Level 3 | Probability of repayment at each conversion | ||||||||
Short-term debt | ||||||||
Embedded Derivative Liability Measurement Input | 2 | |||||||
Level 3 | Option-adjusted spread | ||||||||
Short-term debt | ||||||||
Embedded Derivative Liability Measurement Input | 50 | |||||||
Level 3 | Discount for lack or marketability | ||||||||
Short-term debt | ||||||||
Embedded Derivative Liability Measurement Input | 20 | |||||||
Secured subordinated convertible debentures due June 28, 2019 | ||||||||
Short-term debt | ||||||||
Purchase price | $ 2,000 | |||||||
Face amount | $ 2,200 | |||||||
Original issue discount | 10.00% | |||||||
Carrying amount | $ 1,500 | |||||||
Repayment of subordinated convertible debentures | $ 2,200 | |||||||
November 28, 2018 Series A investor warrants | ||||||||
Short-term debt | ||||||||
Number of shares in exchange of warrant exercise | 8,000,000 | |||||||
Exercise price of warrants (in dollars per share) | $ 0.01 | $ 1.50 | ||||||
Warrant expense | $ 100 | |||||||
November 28, 2018 Series A investor warrants | Risk-free interest rate | ||||||||
Short-term debt | ||||||||
Warrant fair value measurement inputs (as a percent) | 2.2 | |||||||
November 28, 2018 Series A investor warrants | Expected term | ||||||||
Short-term debt | ||||||||
Warrants term | 4 years 8 months 12 days | |||||||
November 28, 2018 Series A investor warrants | Expected dividends | ||||||||
Short-term debt | ||||||||
Warrant fair value measurement inputs (as a percent) | 0 | |||||||
November 28, 2018 Series A investor warrants | Expected volatility | ||||||||
Short-term debt | ||||||||
Warrant fair value measurement inputs (as a percent) | 204.4 |
Leases - Supplemental Informati
Leases - Supplemental Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Leases | |||||
Operating lease costs | $ 100 | $ 100 | $ 200 | $ 400 | |
Balance Sheet Information related to operating leases | |||||
Operating lease ROU assets | 540 | 540 | $ 758 | ||
Operating lease liabilities, current portion | 309 | 309 | 291 | ||
Operating lease liabilities, long-term portion | 243 | 243 | $ 477 | ||
Total operating lease liabilities | $ 552 | 552 | |||
Cash Flow Information related to operating leases | |||||
Cash paid for amounts included in the measurement of operating leases liabilities | $ 242 |
Leases - Maturities of Liabilit
Leases - Maturities of Liabilities (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Maturities of operating lease liabilities | |
2021 | $ 330 |
2022 | 248 |
Total lease payments | 578 |
Less: imputed interest | 26 |
Total lease liabilities | $ 552 |
Weighted-average remaining lease term at end of period (in years) | 1 year 8 months 12 days |
Weighted-average discount rate at end of period | 5.10% |
Equity - Conversions of stock (
Equity - Conversions of stock (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 23, 2020 | May 28, 2020 | Apr. 15, 2020 | Feb. 01, 2019 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 |
Equity | ||||||||
Cashless exercise of warrants (Shares) | 58,981 | |||||||
Common stock issued for professional services (Shares) | 50,000 | |||||||
Common stock issued for professional services | $ 200 | $ 205 | ||||||
Institutional exercise of warrants (Shares) | 5,085,834 | |||||||
Warrant exercise price (in dollars per share) | $ 0.12 | |||||||
Proceeds from exercise of warrants | $ 600 | $ 610 | $ 239 | |||||
Series B convertible preferred stock | ||||||||
Equity | ||||||||
Preferred stock outstanding | 3 | 3 | ||||||
Common Stock | ||||||||
Equity | ||||||||
Cashless exercise of warrants (Shares) | 58,981 | |||||||
Common stock issued for professional services (Shares) | 50,000 | |||||||
Institutional exercise of warrants (Shares) | 69,167 | 5,085,834 | 200,202 | |||||
Common Stock | Series E convertible preferred stock | ||||||||
Equity | ||||||||
Shares issuable upon conversion of preferred stock | 1 | |||||||
Common Stock | Series B convertible preferred stock | ||||||||
Equity | ||||||||
Shares issuable upon conversion of preferred stock | 1,250 | |||||||
Common Stock | Conversion of common stock into series E preferred stock | ||||||||
Equity | ||||||||
Shares converted | 9,993 | |||||||
Common Stock | Conversion of series B preferred stock into common stock | ||||||||
Equity | ||||||||
Shares issued on conversion | 1,040 | |||||||
Preferred Stock | Series B convertible preferred stock | ||||||||
Equity | ||||||||
Preferred stock outstanding | 3 | |||||||
Preferred Stock | Conversion of common stock into series E preferred stock | Series E convertible preferred stock | ||||||||
Equity | ||||||||
Shares issued on conversion | 1,192,000 | |||||||
Preferred Stock | Conversion of series B preferred stock into common stock | Series B convertible preferred stock | ||||||||
Equity | ||||||||
Shares converted | 156 |
Equity - Issuance of stock and
Equity - Issuance of stock and warrants (Details) - USD ($) | Apr. 15, 2020 | Sep. 23, 2019 | Jun. 18, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Equity | |||||
Stock issued (in shares) | $ 130,000 | ||||
Purchase price (in dollars per share) | $ 2.40 | ||||
Warrant exercise price (in dollars per share) | $ 0.12 | ||||
Proceeds from exercise of warrants | $ 600,000 | $ 610,000 | $ 239,000 | ||
Series A warrants | Private placements | |||||
Equity | |||||
Warrant exercise price (in dollars per share) | $ 2.64 | ||||
Series B warrants | |||||
Equity | |||||
Proceeds from exercise of warrants | $ 6,900,000 | ||||
Series B warrants | Private placements | |||||
Equity | |||||
Number of shares in exchange of warrant exercise | 3,333,334 | ||||
Warrant exercise price (in dollars per share) | $ 2.40 | ||||
Series C pre-funded warrants | Private placements | |||||
Equity | |||||
Purchase price (in dollars per share) | $ 0.12 | ||||
Series E warrants | |||||
Equity | |||||
Number of shares in exchange of warrant exercise | 233,334 | ||||
Warrant exercise price (in dollars per share) | $ 6 | ||||
Common Stock | Series B warrants | Private placements | |||||
Equity | |||||
Number of shares in exchange of warrant exercise | 3,333,334 | ||||
Common Stock | Series B warrants | Private placements | |||||
Equity | |||||
Number of shares in exchange of warrant exercise | 3,203,334 | ||||
Warrants | Private placements | |||||
Equity | |||||
Proceeds from exercise of warrants | $ 6,900,000 | ||||
Warrants | Series C pre-funded warrants | Private placements | |||||
Equity | |||||
Purchase price (in dollars per share) | $ 2.28 | ||||
Warrants | Placement agent warrants | |||||
Equity | |||||
Warrant exercise price (in dollars per share) | $ 3 | ||||
Number of warrants issued | 233,334 |
Warrants (Details)
Warrants (Details) $ / shares in Units, $ in Thousands | Sep. 14, 2020USD ($)shares | Apr. 15, 2020USD ($)$ / shares | Mar. 25, 2020USD ($)shares | Sep. 23, 2019USD ($)$ / sharesshares | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) |
Class of Warrant or Right [Line Items] | ||||||
Proceeds from Warrant Exercises | $ | $ 600 | $ 610 | $ 239 | |||
Warrant exercise price (in dollars per share) | $ / shares | $ 0.12 | |||||
Series G Warrants | ||||||
Class of Warrant or Right [Line Items] | ||||||
Number of warrants issued | 1,200,000 | 1,200,000 | ||||
Value of warrants issued | $ | $ 2,900 | $ 1,400 | ||||
Series G Warrants | Risk-free interest rate | ||||||
Class of Warrant or Right [Line Items] | ||||||
Warrant fair value measurement inputs (as a percent) | 0.27 | 0.56 | ||||
Series G Warrants | Expected dividends | ||||||
Class of Warrant or Right [Line Items] | ||||||
Warrant fair value measurement inputs (as a percent) | 0 | 0 | ||||
Series G Warrants | Expected term | ||||||
Class of Warrant or Right [Line Items] | ||||||
Warrants term | 5 years | 5 years | ||||
Series G Warrants | Expected volatility | ||||||
Class of Warrant or Right [Line Items] | ||||||
Warrant fair value measurement inputs (as a percent) | 101.1 | 97 | ||||
Series B warrants | ||||||
Class of Warrant or Right [Line Items] | ||||||
Warrants Exercised | 3,333,334 | |||||
Stock Issued During Period, Warrant Exercises | 69,167 | |||||
Proceeds from Warrant Exercises | $ | $ 6,900 | |||||
Series E warrants | ||||||
Class of Warrant or Right [Line Items] | ||||||
Number of warrants issued | 3,333,334 | |||||
Warrants term | 5 years | |||||
Warrant exercise price (in dollars per share) | $ / shares | $ 6 | |||||
Number of shares in exchange of warrant exercise | 233,334 | |||||
Series F prefunded warrants | ||||||
Class of Warrant or Right [Line Items] | ||||||
Number of warrants issued | 3,264,167 |
Revenue Disaggregation and Op_3
Revenue Disaggregation and Operating Segments (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)segment | Sep. 30, 2019USD ($) | |
Revenue Recognition | ||||
Revenue | $ 3,602 | $ 3,515 | $ 8,092 | $ 11,039 |
Number of Operating Segments | segment | 2 | |||
United States | ||||
Revenue Recognition | ||||
Revenue | 2,594 | 3,143 | $ 6,006 | 10,219 |
Australia | ||||
Revenue Recognition | ||||
Revenue | 307 | $ 372 | $ 725 | $ 820 |
Percentage of total | 10.50% | 9.00% | 7.20% | |
Europe | ||||
Revenue Recognition | ||||
Revenue | 637 | $ 1,273 | ||
Rest of world | ||||
Revenue Recognition | ||||
Revenue | $ 64 | $ 88 | ||
Great Britain | ||||
Revenue Recognition | ||||
Percentage of total | 9.60% |
Income Taxes - Income Tax Benef
Income Taxes - Income Tax Benefit (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Current: | ||||
Income tax (expense) benefit | $ 39 | $ 0 | $ 108 | $ 586 |
Stock-based Compensation - Expe
Stock-based Compensation - Expense for Stock-Based Awards (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Compensation expense recognized | ||||
Stock-based compensation expense | $ 255 | $ (497) | $ 1,029 | $ 1,486 |
Total unrecognized compensation costs related to unvested awards | $ 500 | $ 500 | ||
Weighted-average period of recognition for unrecognized compensation costs related to unvested awards | 1 year 4 months 24 days | |||
Options granted (in shares) | 0 | 0 | 0 | 0 |
Selling and marketing | ||||
Compensation expense recognized | ||||
Stock-based compensation expense | $ (78) | $ 70 | ||
General and Administrative | ||||
Compensation expense recognized | ||||
Stock-based compensation expense | $ 255 | (420) | $ 1,029 | 43 |
Research and development | ||||
Compensation expense recognized | ||||
Stock-based compensation expense | $ 1 | $ 1,373 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Thousands | Nov. 13, 2020USD ($)item | Jul. 29, 2020USD ($) | Jun. 23, 2020USD ($) | Mar. 25, 2020USD ($) | Sep. 30, 2020USD ($) |
Subsequent events | |||||
Amount received | $ 955 | ||||
Credit agreement | |||||
Subsequent events | |||||
Amount received | $ 500 | $ 500 | $ 2,500 | ||
Subsequent Event | |||||
Subsequent events | |||||
Number of additional delayed drawdowns | item | 2 | ||||
Subsequent Event | Credit agreement | |||||
Subsequent events | |||||
Amount received | $ 500 |