Obalon Therapeutics, Inc. (NASDAQ:OBLN), a vertically integrated medical technology company with the first and only FDA-approved swallowable, gas-filled intragastric balloon system for the treatment of obesity, today announced its financial results for the second quarter ended June 30, 2020.

Financial results for the second quarter of 2020

Revenue for the second quarter of 2020 was $0.7 million, compared to $0.4 million for the second quarter of 2019, primarily due to reversals of revenue reserves as a result of suspending business operations at the company-branded retail treatment centers. Net loss for the second quarter of 2020 was $4.2 million, compared to $6.8 million for the second quarter of 2019. Net loss per share for the second quarter of 2020 was $0.54, compared to $2.52 for the second quarter of 2019.

Cost of revenue was $0.4 million for the second quarter of 2020, down from $0.7 million for the second quarter of 2019. Gross profit for the second quarter of 2020 was $0.3 million, compared to a gross deficit of $0.3 million for the second quarter of 2019.

Research and Development expense for the second quarter of 2020 totaled $0.8 million, down from $1.8 million for the second quarter of 2019. Selling, General and Administrative expense decreased to $2.4 million for the second quarter of 2020, compared to $4.3 million for the second quarter of 2019.

The Company recognized $1.3 million impairment expense and other charges related to its inventory and long-lived assets during the second quarter of 2020, as a result in the Company's shift in business strategy away from the retail treatment centers to reimbursement.

Operating loss for the second quarter of 2020 was $4.2 million, down from a loss of $6.4 million for the second quarter of 2019.

As of June 30, 2020, the Company had cash and cash equivalents of $6.8 million and $0.4 million of debt related to its Payroll Protection Program loan. The Company intends to continue exploring the potential for third-party reimbursement for the Obalon Balloon System, as well as exploring and evaluating financial alternatives to help meet its capital needs and strategic alternatives that might enhance stockholder value.  There is no assurance that any financial or strategic alternative will be identified.  If the Company is not able to raise additional capital to meet its needs or to identify a strategic alternative in the best interest of stockholders, it will have to discontinue all operations and may be required to declare bankruptcy or dissolve.

About Obalon Therapeutics, Inc.  Obalon Therapeutics, Inc. (NASDAQ:OBLN) is a San Diego-based company focused on developing and commercializing novel technologies for weight loss.

Cautionary Statement Regarding Forward Looking Statements

This press release contains forward-looking statements that are not purely historical regarding Obalon’s or its management’s intentions, beliefs, expectations and strategies for the future, including those related to new products and their potential benefits. All forward-looking statements and reasons why results might differ included in this press release are made as of the date of this release, based on information currently available to Obalon, deal with future events, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in those forward looking statements. The risks and uncertainties that may cause actual results to differ materially from Obalon’s current expectations are more fully described in Obalon’s annual report on Form 10-K for the period ended December 31, 2019, periodic reports on Form 10-Q for the period ended June 30, 2020 and March 31, 2020 and its other reports, each as filed with the Securities and Exchange Commission. Except as required by law, Obalon assumes no obligation to update any such forward-looking statement after the date of this report or to conform these forward-looking statements to actual results.

OBALON THERAPEUTICS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(unaudited)(in thousands, except shares and per share data)
         
  Three Months Ended June 30,     Six Months Ended June 30,
   2020   2019   2020   2019
                               
Revenue $ 703     $ 386     $ 1,483     $ 2,161  
Cost of revenue 423     679     964     1,911  
Gross profit (deficit) 280     (293 )   519     250  
Operating expenses:              
Research and development 765     1,788     2,022     4,227  
Selling, general and administrative 2,362     4,332     6,255     10,536  
Asset impairment and other charges 1,310         1,310      
Total operating expenses 4,437     6,120     9,587     14,763  
Loss from operations (4,157 )   (6,413 )   (9,068 )   (14,513 )
Interest (expense) income, net (5 )   (295 )   30     (485 )
Other expense, net (26 )   (59 )   (411 )   (59 )
Net loss and comprehensive loss $ (4,188 )   $ (6,767 )   $ (9,449 )   $ (15,057 )
Net loss per share, basic and diluted $ (0.54 )   $ (2.52 )   $ (1.22 )   $ (6.02 )
Weighted-average common shares outstanding, basic and diluted 7,728,624     2,687,829     7,726,915     2,500,619  
                       

OBALON THERAPEUTICS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except shares and par value data) 
  June 30, 2020   December 31, 2019
Assets (unaudited)    
Current assets:      
Cash and cash equivalents $ 6,804     $ 14,055  
Accounts receivable, net     285  
Inventory     1,936  
Other current assets 3,971     1,959  
Total current assets 10,775     18,235  
Property and equipment, net 1,055     1,081  
Lease right-of-use assets 748     1,077  
Other long-term assets 1,295      
Total assets $ 13,873     $ 20,393  
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 1,054     $ 648  
Accrued compensation 240     820  
Deferred revenue 123     424  
Other current liabilities 3,603     1,524  
Current portion of lease liabilities 579     561  
Total current liabilities 5,599     3,977  
Lease liabilities long-term 666     567  
Long-term debt 430      
Total long-term liabilities 1,096     567  
Total liabilities 6,695     4,544  
Commitments and contingencies      
Stockholders’ equity:      
Common stock, $0.001 par value; 100,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 7,731,633 and 7,724,100 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 8     8  
Additional paid-in capital 189,049     188,271  
Accumulated deficit (181,879 )   (172,430 )
Total stockholders’ equity 7,178     15,849  
Total liabilities and stockholders’ equity $ 13,873     $ 20,393  
               

OBALON THERAPEUTICS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)(in thousands)
       
               
  Six Months Ended June 30,
    2020       2019  
               
Operating activities:              
Net loss $ (9,449 )   $ (15,057 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation 187     256  
Stock-based compensation 762     1,641  
Loss on disposal of fixed assets     95  
Amortization of right-of-use assets 239     186  
Accretion of investment discount, net     (2 )
Amortization of debt discount     70  
Impairment of long-lived assets and other charges 1,257      
Impairment of inventory 53      
Change in operating assets and liabilities:      
Accounts receivable, net 285     423  
Inventory (524 )   (157 )
Other current assets (1,845 )   1,760  
Accounts payable 405     (191 )
Accrued compensation (564 )   (2,712 )
Deferred revenue (302 )   (32 )
Lease liabilities, net (147 )   (136 )
Other current and long term liabilities 2,079     (142 )
     Net cash used in operating activities (7,564 )   (13,998 )
Investing activities:      
Maturities of short-term investments     2,550  
Purchase of property and equipment (117 )   (20 )
     Net cash (used in) provided by investing activities (117 )   2,530  
Financing activities:      
Proceeds from long-term loan 430     10,000  
Payment on long-term loan     (15,000 )
Proceeds from issuance of common stock, net of issuance costs     8,793  
Proceeds from sale of common stock upon exercise of stock options     1  
     Net cash provided by financing activities 430     3,794  
     Net decrease in cash and cash equivalents (7,251 )   (7,674 )
Cash and cash equivalents at beginning of period 14,055     21,187  
Cash and cash equivalents at end of period $ 6,804     $ 13,513  
Supplemental cash flow information:      
Interest paid $     $ 563  
Unpaid issuance costs $     $ 377  
               
For Obalon Therapeutics, Inc.

Investor Contact: 
Andrew Rasdal 
President and Chief Executive Officer 
Obalon Therapeutics, Inc. 
Office: +1 844 362 2566
arasdal@obalon.com
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