ReShape Lifesciences Inc

Previous wording

The following table contains a reconciliation of GAAP net loss to Adjusted EBITDA attributable to common stockholders for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

The following table contains a reconciliation of GAAP net loss to Adjusted EBITDA attributable to common stockholders for the three and six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

Revenue totaled $1.9 million for the three months ended March 31, 2024, which represents a contraction of 15.0%, or $0.3 million compared to the same period in 2023. This primarily resulted from a decrease in sales volume primarily due to GLP-1 pharmaceutical weight-loss alternatives.

Current wording

Revenue totaled $2.0 million for the three months ended June 30, 2024, which represents a contraction of 12.8%, or $0.3 million compared to the same period in 2023. This primarily resulted from a decrease in sales volume primarily due to GLP-1 pharmaceutical weight-loss alternatives.

Previous wording

Sales and Marketing Expense. Sales and marketing expenses for the three months ended March 31, 2024, decreased by $1.2 million, or 53.6%, to $1.0 million, compared to $2.2 million for the same period in 2023. The decrease is primarily due to a decrease of $0.7 million in advertising and marketing expenses, including consulting and professional marketing services, as the Company has reevaluated its marketing approach and has moved to a targeted digital marketing campaign, resulting in a reduction of costs. We also had a reduction in payroll expenditure, including commissions, stock compensation expense and travel of $0.5 million, due to changes in sales personnel and lower sales.

Current wording

Sales and Marketing Expense. Sales and marketing expenses for the three months ended June 30, 2024, decreased by $1.5 million, or 69.2%, to $0.7 million, compared to $2.2 million for the same period in 2023. The decrease is primarily due to a decrease of $0.8 million in advertising and marketing expenses, including consulting and professional marketing services, as the Company has reevaluated its marketing approach and has moved to a targeted digital marketing campaign, resulting in a reduction of costs. Additionally, there was a decrease of $0.7 million in payroll-related expenditures, including commissions, stock compensation expense and travel, due to changes in sales personnel and a reduction in sales.

Previous wording

Gross Profit. Gross profit for both the three months ended March 31, 2024 and 2023, was $1.2 million. Gross profit as a percentage of total revenue for the three months ended March 31, 2024, was 59.9% compared to 53.5% for the same period in 2023. The increase in gross profit percentage is due to the reduction in overhead related costs, primarily payroll, as we had a reduction of employees late in 2023.

Current wording

Gross Profit. Gross profit for the six months ended June 30, 2024 and 2023, was $2.3 million and $2.4 million, respectively. Gross profit as a percentage of total revenue for the six months ended June 30, 2024, was 58.8% compared to 53.2% for the same period in 2023. The increase in gross profit percentage is due to the reduction in overhead related costs, primarily payroll, as we had a reduction of employees late in 2023.

Previous wording

General and Administrative Expense. General and administrative expenses for the three months ended March 31, 2024, decreased by $2.3 million, or 55.1%, to approximately $1.9 million, compared to $4.2 million for the same period in 2023. The decrease is primarily due to a reduction in professional services, such as audit and legal fees of $1.3 million primarily due to the fiscal year end 2022 restatement that occurred during the first quarter of 2023, and a reduction in payroll-related expenses, including a reduction in stock-based compensation expense of $0.5 million, due to decline in staffing levels. We also had a decrease in rent and insurance of $0.1 million, as we moved our headquarters during the second quarter of 2023 to a smaller facility to reduce costs.

Current wording

General and Administrative Expense. General and administrative expenses for the six months ended June 30, 2024, decreased by $2.7 million, or 40.1%, to $4.0 million, compared to $6.7 million for the same period in 2023. The decrease is primarily due a reduction in professional services, such as audit and legal fees of $1.5 million primarily due to the Company incurring one-time adjustments for professional services related to the February 2023 public offering, and a reduction in payroll-related expenditures, including stock-based compensation expense, of $0.7 million due to decline in staffing levels, and a reduction in rent expense of $0.1 million, as we moved our headquarters at the end of the second quarter of 2023 to a small facility to reduce costs. Additionally, there was a reduction in bad debt expense of $0.3 million, and a reduction in other miscellaneous expenses of $0.1 million.

Previous wording

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 as the Company has modified its strategy to a metrics-driven approach through a sustainable and scalable business model, via a digital lead generation and re-engagement strategy. As of March 31, 2024, the Company had net working capital of approximately $4.4 million, primarily due to cash and cash equivalents and restricted cash of $2.5 million. The Company’s principal source of liquidity as of March 31, 2024, consisted of approximately $2.5 million of cash and cash equivalents and restricted cash, and $1.6 million of accounts receivable. Based on its available cash resources, the Company will not have sufficient cash on hand to fund its current operations for more than twelve months from the date of filing this Quarterly Report on Form 10-Q. This condition raises

Current wording

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 as the Company has modified its strategy to a metrics-driven approach through a sustainable and scalable business model, via a digital lead generation and re-engagement strategy. As of June 30, 2024, the Company had net working capital of approximately $2.9 million, primarily due to cash and cash equivalents and restricted cash of $1.2 million. The Company’s principal source of liquidity as of June 30, 2024, consisted of approximately $1.2 million of cash and cash equivalents and restricted cash, and $1.4 million of accounts receivable. Based on its available cash resources, the Company will not have sufficient cash on hand to fund its current operations for more than twelve months from the date of filing this Quarterly Report on Form 10-Q. This condition raises substantial doubt about the Company’s ability to continue as a going concern. The Company believes in the viability of its business strategy and in its ability to raise additional funds, however, there can be no assurance to that effect. Management’s plans are assuming the merger with Vyome and the asset purchase with Biorad, announced in July of 2024 occur.

Previous wording

Net cash used in operating activities from operations was $2.1 million and $5.1 million for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, net cash used in operating activities was primarily the result of our net loss of $2.2 million, partially offset by non-cash adjustments for stock-based compensation expense of $0.1 million, offset by a negative cash impact related to a reduction in bad debt of approximately $0.3 million, as we received a large return of products where the receivable was fully reserved. We show a positive cash impact on accounts receivable of $0.4 million, and inventory of approximately $0.3 million, and a negative impact to cash for accounts payable and accrued liabilities of $0.3 million.

Current wording

Net cash used in operating activities from operations was $3.4 million and $11.7 million for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, net cash used in operating activities was primarily the result of our net loss of $3.9 million, partially offset by non-cash adjustments for stock-based compensation expense of $0.1 million and inventory reserve of $0.1 million, offset by a negative cash impact related to a reduction in bad debt of approximately $0.2 million, as we received a large return of products where the receivable was fully reserved and $0.4 million related to old accounts payable that have passed their statute of limitations. We show a positive cash impact on accounts receivable of $0.4 million, and inventory of approximately $0.4 million, and a negative impact to cash for accounts payable and accrued liabilities of $0.1 million.

Previous wording

For the three months ended March 31, 2023, net cash used in operating activities was primarily the result of our net loss of $2.7 million, partially offset by non-cash adjustments for stock-based compensation expense of $0.2 million and non-cash offering cost of $0.3 million, offset by a negative cash impact related to gains recognized for changes in fair value of liability warrants of $3.0 million. We show a negative cash impact to prepaid expenses of $0.4 million. This was offset by a positive cash impact to inventory of $0.1 million and accounts payable and accrued liabilities of $0.3 million.

Current wording

For the six months ended June 30, 2023, net cash used in operating activities was primarily the result of our net loss of $6.2 million, partially offset by non-cash adjustments for stock-based compensation expense of $0.4 million, non-cash offering cost of $0.3 million and bad debt expense of approximately $0.1 million, offset by a negative cash impact related to gains recognized for changes in fair value of liability warrants of $3.4 million. We show a negative cash impact on accounts payable and accrued liabilities of $2.8 million and prepaid expenses of $0.5 million. This was offset by a positive cash impact on inventory of $0.3 million.

Previous wording

There was no cash used in investing activities for the three months ended March 31, 2024, and net cash used in investing activities for the three months ended March 31, 2023, was minimal.

Current wording

There was no cash used in investing activities for the six months ended June 30, 2024, and net cash used in investing activities for the six months ended June 30, 2023, was minimal.

Previous wording

There was no cash provided by financing activities for the three months ended March 31, 2024. Net cash provided by financing activities was $10.2 million for the three months ended March 31, 2023, due to the proceeds received from the public offering completed during February 2023, less costs to complete the transaction.

Current wording

Financing activities provided $24 thousand related to exercise of warrants for the six months ended June 30, 2024. Net cash provided by financing activities was $12.5 million for the six months ended June 30, 2023, due to the proceeds received from the public offering completed during February 2023 and April 2023, less costs to complete the transaction.

Previous wording

The Company’s anticipated operations include plans to (i) grow sales and operations of the Company with the Lap-Band product line both domestically and internationally as well as to obtain cost savings synergies, (ii) introduce to the market Lap-Band 2.0 FLEX, (iii) continue development of the Diabetes Bloc-Stim Neuromodulation (“DBSN”) device, (iv) identifying strategic merger and acquisition alternatives, (v) seek opportunities to find strategic partners to leverage our intellectual property portfolio and custom development services to provide third-party sales and licensing opportunities, and (vi) explore and capitalize on synergistic opportunities to expand our portfolio and offer future minimally invasive treatments and therapies in the obesity continuum of care. 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, and product development activities. If managements’ plans don’t develop, and the Company doesn’t get additional cash raises, at the current burn rate, management expects to run out of cash during the third quarter of 2024.

Current wording

The Company’s anticipated operations include plans to (i) merge with Vyome Therapeutics, Inc and sell certain assets to Biorad, which will continue the operations, for further details see Note 11, (ii) grow sales and operations of the Company with the Lap-Band product line both domestically and internationally as well as to obtain cost savings synergies, (iii) introduce to the market Lap-Band 2.0 FLEX, (iv) continue development of the Diabetes Bloc-Stim Neuromodulation (“DBSN”) device, and (v) prior to such merger, 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 and product development activities. If management’s plans do not develop, and the Company does not raise additional cash, at the current burn rate, management expects to run out of cash during the third quarter of 2024.

Previous wording

During the three months ended March 31, 2024 there were no material changes to our significant accounting policies above, which are fully described in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

During the six months ended June 30, 2024, there were no material changes to our significant accounting policies above, which are fully described in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.