Stock-based Compensation

9 Months Ended

12 Months Ended

Sep. 30, 2024

Dec. 31, 2023

Stock-based Compensation

Stock-based Compensation

(9)Stock-based Compensation

Stock-based compensation expense related to stock options and RSUs issued under the ReShape Lifesciences Inc. 2022 Stock Incentive Plan (the “Plan”) for the three months and nine months ended September 30, 2024 and 2023 were as follows:


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2024			2023			2024			2023
Sales and marketing		$	4		$	30		$	19		$	89
General and administrative			13			128			83			384
Research and development			15			58			67			183
Total stock-based compensation expense		$	32		$	216		$	169		$	656

Stock Options

A summary of the status of the Company’s stock options as of September 30, 2024, and changes during the nine months ended September 30, 2024, are as follows:


							Weighted
				Weighted			Average		Aggregate
				Average			Remaining		Intrinsic
				Exercise Price			Contractual		Value
		Shares		Per Share			Life (years)		(in thousands)
Outstanding at December 31, 2023		263		$	21,909.50				$	—
Options granted		—			—
Options exercised		—			—
Options cancelled		(105)			7,629.90
Outstanding at September 30, 2024		158		$	31,381.48		6.10		$	—
Exercisable at September 30, 2024		144		$	34,101.10		5.97		$	—
Vested and expected to vest at September 30, 2024		158		$	31,381.48		6.10		$	—

There was no intrinsic value to outstanding stock options at September 30, 2024. The unrecognized share-based expense at September 30, 2024 was $34 thousand and will be recognized over a weighted average period of 1.05 years.

Stock option awards outstanding under the Company’s incentive plans have been granted at exercise prices that are equal to the market value of its common stock on the date of grant. Such options generally vest over a period of four years and expire at ten years after the grant date. The Company recognized compensation expense ratably over the vesting period. The Company uses a Black-Scholes option-pricing model to estimate the fair value of stock options granted, which requires the input of both subjective and objective assumptions as follows:

Expected Term – The estimate of expected term is based on the historical exercise behavior of grantees, as well as the contractual life of the options granted.

Expected Volatility – The expected volatility factor is based on the volatility of the Company’s common stock for a period equal to the term of the stock options.

Risk-free Interest Rate – The risk-free interest rate is determined using the implied yield for a traded zero-coupon U.S. Treasury bond with a term equal to the expected term of the stock options.

Expected Dividend Yield – The expected dividend yield is based on the Company’s historical practice of paying dividends on its common stock.

Restricted Stock Units

A summary of the Company’s unvested RSUs award activity for the nine months ended September 30, 2024, is as follows:


				Weighted
				Average
				Grant Date
		Shares		Fair Value
Unvested RSUs at December 31, 2023		25		$	7,505.04
Granted		—			—
Vested ⁽¹⁾		(17)		$	(9,333.94)
Cancelled/Forfeited		—			—
Non-vested RSUs at September 30, 2024		8		$	3,847.14

(1)	At September 30, 2024, there were 2 shares of common stock related to RSU awards that had vested and the shares were not distributed to the participants.

The fair value of each RSU is the closing stock price on the Nasdaq of the Company’s common stock on the date of grant. Upon vesting, a portion of the RSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining RSUs will be settled in shares of the Company’s common stock after the vesting period. The unrecognized compensation cost related to the RSUs at September 30, 2024 was $25 thousand and expected to be recognized over a period of 0.92 years.

(12)

Stock-based Compensation

The ReShape Lifesciences Inc. 2022 Equity Incentive Plan (the “Plan”) became effective December 14, 2022, and provides for the grant of stock options or other stock-based awards to employees, officers, non-employee directors and outside consultants of the Company. The maximum number of shares of common stock that will be available for issuance under this Plan was originally 105,000 shares; provided however, that the aggregate number of shares that may be issued under all awards under the Plan will automatically increase on an annual basis on the first day of each year beginning in 2024 such that the aggregate number of shares that may be issued under all awards under this Plan equals 15% of the total number of shares of Common Stock, on a converted basis, on the last day of the immediately preceding fiscal year. Under the 2003 Stock Incentive Plan, as amended in 2018 (the “Prior Plan”), as of January 1, 2023, there were 110,798 shares available.

The Plan is administered by the committee, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. Options granted under the Plan expire no later than ten years from the date of grant. The exercise price of each option may not be less than 100% of the fair market value of the common stock at the date of grant, except if an incentive stock option is granted to a Plan participant possessing more than 10% of the Company’s common stock, as defined by the Plan, the exercise price may not be less than 110% of the fair value of the common stock at the date of grant. Employee stock options generally vest over four years.

Stock Options

A summary of the status of the Company’s stock options are as follows:


							Weighted
				Weighted			Average		Aggregate
				Average			Remaining		Intrinsic
				Exercise Price			Contractual		Value
		Shares		Per Share			Life (years)		(in thousands)
Outstanding at December 31, 2021		306		$	23,117.06				$	—
Options granted		194			3,422.00
Options exercised		—			—
Options cancelled		(130)			8,071.28
Outstanding at December 31, 2022		370			18,075.70				$	—
Options granted		—			—
Options exercised		—			—
Options cancelled		(107)			8,661.72
Outstanding at December 31, 2023		263			21,909.50		6.4		$	—
Exercisable at December 31, 2023		213			25,839.58		6.0			—
Vested and expected to vest at December 31, 2023		274			21,909.50		6.4			—

As of December 31, 2023, stock options under the Plan that were outstanding, exercisable and vested, and expected to vest, had no intrinsic value. The unrecognized share-based expense at December 31, 2023 was $0.1 million and will be recognized over a weighted average period of 1.8 years.

Stock option awards outstanding under the Company’s incentive plans have been granted at exercise prices that are equal to the market value of its common stock on the date of grant. Such options generally vest over a period of four years and expire at ten years after the grant date. The Company recognizes compensation expense ratably over the vesting period. The Company uses a Black-Scholes option-pricing model to estimate the fair value of stock options granted, which requires the input of both subjective and objective assumptions as follows:

Expected Term – The estimate of expected term is based on the historical exercise behavior of grantees, as well as the contractual life of the options granted.

Expected Volatility – The expected volatility factor is based on the volatility of the Company’s common stock.

Risk-free Interest Rate – The risk-free interest rate is determined using the implied yield for a traded zero-coupon U.S. Treasury bond with a term equal to the expected term of the stock options.

Expected Dividend Yield – The expected dividend yield is based on the Company’s historical practice of paying dividends on its common stock.

The Company did not issue any stock options during the year ended December 31, 2023. The Company’s weighted average assumptions used to estimate fair value of stock options granted during the year ended December 31, 2022 were as follows:


Risk-free interest rate		2.67	%
Expected term (in years)		6.25
Expected dividend yield		0	%
Expected volatility		80.40	%

Restricted Stock Units

A summary of the status of the Company’s unvested RSUs are as follows:


				Weighted
				Average
				Grant Date
		Shares		Fair Value
Unvested RSUs at December 31, 2021		591		$	12,644.00
Granted		566			981.36
Vested⁽¹⁾		(865)			(5,651.52)
Cancelled/Forfeited		(213)			(11,013.04)
Unvested RSUs at December 31, 2022		79			10,100.70
Granted		—			—
Vested⁽¹⁾		(54)			(11,298.98)
Cancelled/Forfeited		—			—
Non-vested RSUs at December 31, 2023		25		$	7,505.04

(1)

At December 31, 2023 and 2022, there were 2 and 5 shares of common stock, respectively, related to RSU awards that have vested and the shares were not released to the participants subsequently. Additionally, during the year ended December 31, 2023 due to a decline in our stock price 8 shares of common stock were not issued in order to cover employee taxes.

The fair value of each RSU is the closing price on the Nasdaq of the Company’s common stock on the date of grant. Upon vesting, a portion of the RSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining RSUs will be settled in shares of the Company’s common stock after the vesting period. The unrecognized compensation cost related to RSUs at December 31, 2023 was $0.6 million and is expected to be recognized over a period of 1.2 years.

Compensation expense related to stock options was recognized as follows:


		Year Ended
		December 31,
		2023			2022
Sales and marketing		$	107		$	280
General and administrative			451			1,494
Research and development			209			313
Total stock-based compensation expense		$	767		$	2,087