Business Context and Reporting Period
This Form 8-K is filed by Obalon Therapeutics, Inc. (trading symbol: OBLN) on February 5, 2021. The report discloses a change in the company's independent registered public accounting firm in connection with an Agreement and Plan of Merger entered into on January 19, 2021, with ReShape Lifesciences Inc. and Optimus Merger Sub, Inc.
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, margin, debt, or liquidity figures for the current period. However, it references the prior auditor's report which noted that the company has suffered recurring losses from operations and has a net capital deficiency.
Material Changes
- Change in Auditor: The company dismissed KPMG LLP and engaged BDO USA, LLP as its independent registered public accounting firm to audit the consolidated financial statements for the year ended December 31, 2020.
- Merger Activity: The change in auditor was driven by the merger agreement with ReShape Lifesciences Inc.
- Audit Opinion History: KPMG's prior reports for 2018 and 2019 did not contain adverse opinions but included a "Going Concern" qualification due to recurring losses and net capital deficiency.
Outlook, Risks, and Contingencies
Going Concern Risk: The filing explicitly references a prior "Going Concern" warning from KPMG, stating that the company's recurring losses and net capital deficiency raise substantial doubt about its ability to continue as a going concern. The financial statements did not include adjustments for this uncertainty.
Accounting Changes: The company adopted Accounting Standards Update (ASU) No. 2016-02 regarding leases effective January 1, 2019.
Disagreements: The company reported no disagreements with KPMG regarding accounting principles, practices, or auditing scope during the two-year period ended December 31, 2019, or the subsequent period through February 5, 2021.
Investor Verification Checklist
- Verify the status and expected closing date of the merger with ReShape Lifesciences Inc.
- Review the upcoming audited financial statements for the year ended December 31, 2020, prepared by BDO USA, LLP.
- Assess the company's current liquidity position and capital raise efforts to address the previously noted "Going Concern" deficiency.
- Confirm that no undisclosed disagreements exist between management and the new auditor regarding the merger accounting treatment.