HIND - NASDAQ

Good morning, and thank you for joining the first quarter 2021 ReShape Life Sciences Earnings Webinar. I'm pleased to be joined by Bart Bandy, Chief Executive Officer of ReShape Lifesciences Inc., who will provide an overview of the company's recent activities and business highlights for the first quarter of 2021. Tom Stankovich, Chief Financial Officer of ReShape, will then review the financial results for the first quarter and then turn the call back over to Bart to finish. As a reminder, this conference call as well as ReShape Lifesciences' SEC filings and website at www.reshapelifesciences.com, including the Investor Information section of the website, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those discussed due to known and unknown risks, uncertainties and other factors. These and additional risks and uncertainties are described more fully in the company's filings with the Securities and Exchange Commission, including those factors identified as risk factors in our annual report on Form 10-K and in our quarterly report on Form 10-Q that was filed yesterday. As an additional reminder, our stock is listed OTC, trading under the ticker RSLS. I will now turn the call over to the CEO, Bart Bandy. Bart?

Thanks, James. Good morning, everyone, and thank you for joining us today. The first quarter of 2021 was very productive for ReShape, as we were able to expand the ReShape product portfolio and saw LAP-BAND purchases continue to build from the pandemic with both existing and recommenced accounts. Additionally, one of our highest priorities in the first half of this year has been completing our merger with Obalon and the associated uplisting to NASDAQ. I am pleased to announce that this process continues to progress, including the recent approval of the merger by shareholders holding approximately 95% of our common stock during our shareholder meeting on May 13, 2021. The completion of this merger will create numerous opportunities for our company as the combined company would also begin trading on NASDAQ following the completion of this transaction. Obalon's technology is the first and only swallowable gas-filled balloon system for weight loss and has continued to demonstrate strong efficacy and a best-in-class safety profile for weight loss with lasting results and minimal side effects. In addition to weight loss, patients showed improvement in cardiometabolic risk factors, including fasting glucose, systolic blood pressure, cholesterol and triglycerides. The potential addition of this technology illustrates our mission to build a portfolio of regulatory approved solutions for desired outcomes achieved in conjunction with patient-centric care and data-based best-in-class safety profiles. We are also pleased with the efforts we made during the first quarter in driving the sustainability of our blended products and service portfolio in line with current market trends. In 2020, the World Health Organization encouraged the use of telehealth instead of physical hospital visits to minimize the risk of individuals contracting COVID-19. We have capitalized on this major multimillion-dollar market opportunity with the launch of our ReShapeCare service. ReShapeCare is a reimbursed telehealth-enabled platform that supports medical practices through enhanced patient engagement and customizable pathways for weight loss success. Our distinct patient aftercare model provides live and virtual support for clinicians and their patients regardless of the patient's type of medically supervised therapy or surgical weight loss procedure. This patient-centric program, which also includes our e-commerce patient platform, ReShape Marketplace, is a testament to the innovation, ability and commitment from our company to help as many people as possible with their weight loss journeys. We continue to explore ways to expand our LAP-BAND accounts through integrated sales and patient direct marketing strategies that are congruent with the company's growth strategies, and we will continue to evaluate synergistic technology opportunities that will support strategic expansion of our portfolio and bring additional value to our shareholders. To further support these growth initiatives, we will also be hiring additional personnel to implement metric-based patient direct marketing programs, bring our internal pipeline products to market and drive sales. At ReShape, we will continue to break through the constraints of the COVID-19 pandemic on our industry through a diversified product offering that will increase our market position through a proprietary ecosystem that provides more opportunities for engaging patients and increasing revenues. In addition to the 50% of adults in the U.S., who are trying to lose weight every year, it was reported by the CDC that 78% of all COVID-19 hospitalizations and deaths have been attributed to overweight and obese people. Now more than ever, it is crucial for us to maximize the public awareness of ReShape's weight loss solutions and improve accessibility for more people that want help. As part of our commercial outreach, our digital marketing efforts have generated increased interest for the LAP-BAND with clinicians and potential patients through website updates, SEO tracking, comprehensive social media programs and local media efforts, we have steadily built a growing the audience through the implementation of updated and accurate information regarding the safety and efficacy of the LAP-BAND. During the first quarter of 2021, ReShape Lifesciences generated total revenues of $3.2 million, an increase to revenues of $2.8 million for the prior year period and $3.1 million in the same quarter of 2019. We have also continued to implement significant cost-savings initiatives and expense controls, simultaneously improving the operational efficiencies that positioned us for sustainable success. Tom will provide more insight on these financial protocols in the latter half of his presentation. Although the pandemic has impacted our clinical projects, we have continued to refine and maintain the parameters for our delayed 95-subject ReShape Vest enrollment study in Europe. Patients, at our Spanish site, had their procedures performed prior to the pandemic based closing of medical sites in that region, and we have continued to monitor their results. While we've closed our PMA for the vBloc weight loss indication to reallocate investment and resources, the platform has created a pathway to offer future shareholder value with the ReShape Dual Block Stimulation Neuromodulation technology currently being developed as a treatment for type 2 diabetes mellitus. With funding received from a National Institutes of Health, or NIH, Small Business Innovation Research grant, we were able to identify and successfully meet the necessary endpoints of a preclinical study. We are currently working towards a second NIH grant to generate additional clinical data for this technology. As we work to navigate the current landscape, we remain confident in our progress towards becoming the premier physician-led weight loss company and look forward to providing further updates on our progress. We are emerging from 2020 as a much stronger company, fully committed to continuing our momentum. I'd now like to turn the call over to Tom for a detailed financial results.

Thanks, Bart, and good morning to everyone. First quarter of 2021 proved to be encouraging as compared to the same time last year. For the 3 months ended March 31, 2021, we reported revenues of $3.2 million as compared to revenues of $2.8 million in the 3 months ended March 31, 2020, representing a 15.5% increase. The $400,000 increase was primarily due to greater U.S. sales and was partially offset by a decrease of international sales resulting from several regions heavily affected by the COVID-19 pandemic. We reported gross profit of $2.3 million in the first quarter of 2021, representing a gross margin of 71% compared to $1.5 million in the 3 months ended March 31, 2020, at a gross margin of 54%. The higher gross margin is attributed to increased volume, lower overhead expenses and improved product mix with higher domestic sales, which historically have a greater gross profit margin than international sales. Total operating expenses for the 3 months ended March 31, 2021, decreased by $1.1 million to $4.5 million as compared to $5.6 million for the 3 months ended March 31, 2020. Sales and marketing expenses for the first quarter of 2021 were $1.3 million as compared to $1.5 million for the first quarter of 2020. This decrease stems from lower payroll-related expenses and a reduction in consulting fees. As we center our focus on further tapping into the strong potential and positive return of the weight loss market, we expect to increase our advertising and marketing expenditure for the remainder of 2021. General and administrative expenses were $2.7 million for the 3 months ended March 31, 2021 compared with $2.8 million for the 3 months ended March 31, 2020. The $100,000 decrease was primarily related to the absence of stock option grants, reduced bad debt expense on improved collections and less travel due to the impact of COVID-19. This was offset by an increase in audit, consulting, legal and professional services related to the proposed Obalon merger. Research and development expenses were $600,000 for the 3 months ended March 31, 2021 compared with $1.3 million for the first quarter of 2020. The decrease was primarily a result of a slowdown in clinical trials for the ReShape Vest due to the COVID-19 pandemic. On a non-GAAP adjusted EBITDA basis, including the addition of interest expense, depreciation and amortization and extinguishment of debt, amongst other things, the loss was $1.8 million for the 3 months ended March 31, 2021 compared to an adjusted EBITDA loss of $3.4 million for the same 3 months ended March 31, 2020. This $1.6 million improvement was primarily due to operating expenses which reduced and improved gross profit margins. Turning to the balance sheet. As of March 31, 2021, the company's cash and cash equivalents and restricted cash totaled $1.9 million. We continue to focus on increasing revenues and decreasing our cash burn as we monitor our monthly spend and operations for potential cost reductions. To note, in January 2021, we successfully obtained a $15 million line of credit with an institutional investor, which is accessible to ReShape at any time. However, as of the end of this past quarter, we have not made a draw on this credit facility. Additionally, we have received full forgiveness of our PPP loan, which we received during 2020, which is reflected in our balance sheet at March 31, 2021. As mentioned on our previous earnings announcements, we are on track with our reduced operational expenses and cash burn to extend our runway. We also will continue to prioritize growing revenues while monitoring operating expenses to improve overall operations. With that, I will turn the call back over to Bart.