Item 8.01 Other Events.
(a) On May 11, 2020, the Company announced the various proposed organizational changes described above and provided an update on its ongoing evaluation of strategic alternatives and business options. A copy of the press release announcing the additional organizational changes and the business update is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
(b) On March 25, 2020, the Securities and Exchange Commission (“SEC”) issued an Order under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies (Release No. 34-88465) (the “Order”). The Order provides conditional relief to registrants subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act that are unable to meet certain filing deadlines due to circumstances related to coronavirus disease 2019 (“COVID-19”).
The Company is relying on the Order to delay the filing of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) due to circumstances related to the COVID-19 outbreak. The Company has experienced significant disruptions to its business and operations as a result of COVID-19. In particular, there has been a substantial diversion of attention and resources to other operational matters and away from the Company’s usual quarterly reporting processes. The Company has temporarily halted all new patient treatments at its retail treatment centers and suspended manufacturing activity. The Company has not filled orders for United States customers or its international distributor since
March 2020. In addition, the "stay at home" directives issued by the Governor of California have limited the Company’s access to its facilities and key personnel, as well as disrupted the Company’s normal accounting and reporting processes for the Quarterly Report. We are evaluating the various impacts of COVID-19 on our financial statements, including potential impairment of inventory and long-lived assets.
The above circumstances have adversely affected the completion of our internal quarterly review resulting in our inability to file our Quarterly Report in a timely manner. The Company expects to file the Quarterly Report no later than June 29, 2020 (which is 45 days from the original filing deadline of May 15, 2020).
In addition, the Company is supplementing the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 with the following risk factor:
The COVID-19 pandemic and efforts to reduce its spread have impacted, and may in the future periods negatively impact, our business and operations.
In December 2019, an outbreak of a novel strain of coronavirus (“COVID-19”) originated in Wuhan, China. Since then, COVID-19 has spread to a number of other countries and all 50 states within the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Our business, financial position and results of operations have been and will likely continue to be materially adversely affected by the COVID-19 pandemic. The COVID-19 pandemic has caused, and is continuing to cause, severe disruptions in our business, including our manufacturing facility, supply chain and distribution network. For example, in response to the COVID-19 pandemic, we temporarily halted all new patient treatments at our retail treatment centers and suspended manufacturing activity. We have not filled orders to our United States customers or international distributor since March 2020. In addition, we implemented a furlough with a temporary reduction in hours worked and reduced payroll for all employees, including our named executive officers. Governmental mandates, including shelter-in-place orders, restrictions on travel, quarantine polices and social distancing guidelines, have impacted, and we expect them to continue to impact, our personnel and personnel at our third-party suppliers. In addition, the spread of COVID-19 has disrupted the United States’ healthcare and healthcare regulatory systems, which could divert healthcare resources away from, or materially delay FDA reviews and approvals with respect to our products. Furthermore, our clinical trials may be affected by COVID-19 due to delays or difficulties involving, among others, patient enrollment, site initiation and monitoring, authorizations from regulatory authorities and receipt of the supplies and materials needed to conduct any such trials or studies. We expect that the number of Obalon balloon placements, similar to other elective surgical procedures, will continue to be impacted by recommendations from governmental authorities to suspend or cancel elective, specialty and other procedures and appointments to avoid non-essential patient exposure to medical environments and potential infection with COVID-19. There are many uncertainties regarding COVID-19, including governmental and public health responses and the unknown duration and extent of economic disruption. Due to the uncertainty surrounding COVID-19, we do not currently plan to re-open our retail treatment centers, re-initiate our retail treatment center expansion plans, restart manufacturing operations or plan to ship orders to United States customers or our international distributor. As a result, it is not currently possible to determine all the ways in which COVID-19 will affect our business. However, based on the current state of the pandemic in the United States and abroad, the disease has already disrupted our operations and is likely to have a material adverse effect on our business, results of operations, financial condition, cash flows and stock price, as well heighten many of the risks described elsewhere in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019.
Forward Looking Statements
This Current Report on Form 8-K contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including, without limitation, the anticipated impact of the COVID-19 pandemic on the our business and operating results, our future financial or business performance or strategies, results of operations or financial condition. These statements may be preceded by, followed by or include the words “may,” “might,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions. These forward-looking statements are based on information available to us as of the date they were made and involve a number of risks and uncertainties, which may cause them to turn out to be wrong. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, including the unprecedented impact of COVID-19 pandemic on our business, employees, consultants, service providers, subcontractors and supply chain, stockholders, investors and other stakeholders, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements.
Please refer to our Form 10-K filed with the SEC as well as any subsequent filings made by us pursuant to the Exchange Act, each of which is available on the SEC’s website (www.sec.gov), for a full discussion of the risks and other factors that may impact any forward-looking statements in this presentation.