AP NEWS

Obalon Announces Second Quarter 2018 Financial Results

August 2, 2018

SAN DIEGO, Aug. 02, 2018 (GLOBE NEWSWIRE) -- 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 unaudited financial results as of and for the second quarter ended June 30, 2018.

Second Quarter 2018 highlights:

-- Total revenue of $2.7 million increased 103% vs Q1-18 and 39% vs Q2-17 -- US revenue of $1.5 million increased 211% vs Q1-18 and decreased 20% vs Q2-17 -- US Reorders were $1.0 million, or 64% of US sales, an increase of 221% vs Q1-18 and 61% vs Q2-17 -- Operating loss of $9.6 million decreased 20% vs $12.1 million in Q1-18 and increased 26% vs $7.6 million in Q2-17 -- Amended loan agreement providing access to additional $10.0 million -- Filed PMA-S response for Touch dispenser -- Filed PMA-S for Touch-compatible Navigation system

The Company reported revenue of $2.7 million for the second quarter of 2018, compared to $1.3 million for the first quarter of 2018 and $2.0 million for the second quarter of 2017. Net loss was reported at $9.8 million for the second quarter of 2018, compared to $12.1 million for the first quarter of 2018 and $7.7 million for the second quarter of 2017. Net loss per share for the second quarter of 2018 was $0.57 as compared to $0.71 for the first quarter of 2018 and $0.46 for the second quarter of 2017.

Cost of revenue was $1.7 million for the second quarter of 2018, up from $0.8 million for the first quarter of 2018 and $1.0 million for second quarter of 2017. Gross profit for the second quarter of 2018 was $1.0 million, resulting in a gross margin of 37%, compared to a gross profit of $0.6 million and gross margin of 43% for the first quarter of 2018 and a gross profit of $1.0 million and gross margin of 50% for the second quarter of 2017.

Research and Development expense for the second quarter of 2018 totaled $3.4 million, up from $2.6 million for the first quarter of 2018 and $2.8 million for the second quarter of 2017. Selling, General and Administrative expense decreased to $7.3 million for the second quarter of 2018 as compared to $10.0 million for the first quarter of 2018 and increased from $5.9 million for the second quarter of 2017.

Operating loss for the second quarter of 2018 was $9.6 million, down from $12.1 million for the first quarter of 2018, but up from $7.6 million for the second quarter of 2017.

As of June 30, 2018, cash, cash equivalents and short-term investments were $25.2 million.

“We are pleased with the increase in revenue compared to Q1-18, especially with reorder revenues from existing customers,” said Bill Plovanic, CFO of Obalon. “In Q2-18, we reduced our cash usage by $2.7 million compared to Q1-18. We believe this, along with the $25.2 million cash on hand at the end of Q2-18 and access to an additional $10.0 million of debt, furthers our ability to support the continued development of this novel and exciting non-surgical treatment for obesity.”

Call InformationA conference call to discuss second quarter 2018 financial results is scheduled for today, August 2, 2018, at 8:30 AM Eastern Time (5:30 AM Pacific Time). Interested parties may access the conference call by dialing (844) 889-7791 (U.S.) or (661) 378-9934 (international) using passcode 6384879. Media and individuals will be in a listen-only mode. Participants are asked to dial in a few minutes prior to the call to register for the event. The conference call will also be webcast live at: https://edge.media-server.com/m6/p/jud3fsps.

An archive of the webcast will be available for twelve months following the event on the Obalon Therapeutics, Inc. website located at http://investor.obalon.com in the “News & Events” section.

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. The Obalon management team has over 150 combined years of experience in developing and commercializing novel medical technologies with a track record of financial and clinical excellence. For more information, please visit www.obalon.com.

For Obalon Therapeutics, Inc.

Investor Contact: William Plovanic Chief Financial Officer Obalon Therapeutics, Inc. Office: +1 760 607 5103 wplovanic@obalon.com

Media: Megan Driscoll EvolveMKDOffice Phone: +1 646 517 4220 mdriscoll@evolvemkd.com

OBALON THERAPEUTICS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(in thousands, except shares and per share data)

Three Months Ended Six Months Ended June June 30, 30, 2018 2017 2018 2017 ---------- ---------- ----------- ----------- (Unaudited) Revenue $ 2,732 $ 1,963 $ 4,078 $ 3,435 Cost of revenue 1,732 990 2,501 1,813 Gross profit 1,000 973 1,577 1,622 Operating expenses: Research and development 3,352 2,760 5,991 5,160 Selling, general and administrative 7,250 5,853 17,256 11,793 -------- - -------- - --------- - --------- - Total operating expenses 10,602 8,613 23,247 16,953 -------- - -------- - --------- - --------- - Loss from operations (9,602 ) (7,640 ) (21,670 ) (15,331 ) Interest expense, net (57 ) (35 ) (94 ) (89 ) Other expense (94 ) (55 ) (115 ) (55 ) -------- - -------- - --------- - --------- - Net loss (9,753 ) (7,730 ) (21,879 ) (15,475 ) Other comprehensive income (loss) — — 6 (18 ) -------- - -------- - --------- - --------- - Net loss and comprehensive loss $ (9,753 ) $ (7,730 ) $ (21,873 ) $ (15,493 ) - ------ - - ------ - - ------- - - ------- - Net loss per share, basic and diluted $ (0.57 ) $ (0.46 ) $ (1.29 ) $ (0.93 ) - ------ - - ------ - - ------- - - ------- - Weighted-average common shares outstanding, basic and diluted 17,039,87 16,637,33 17,013,529 16,599,891 6 5 -------- - -------- - --------- - --------- -

OBALON THERAPEUTICS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except shares and par value data)

June 30, December 2018 31, 2017 ---------- ---------- Assets (Unaudited) Current assets: Cash and cash equivalents $ 24,212 $ 21,108 Short-term investments 997 23,292 Accounts receivable, net of allowance of $433 and $239, respectively 3,049 4,223 Inventory 1,842 1,418 Other current assets 857 1,714 -------- - -------- - Total current assets 30,957 51,755 Property and equipment, net 1,514 1,346 -------- - -------- - Total assets $ 32,471 $ 53,101 - ------ - - ------ - Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,445 $ 1,276 Accrued compensation 2,132 4,494 Deferred revenue 302 510 Other current liabilities 2,552 1,773 Current portion of long-term loan 3,965 1,958 -------- - -------- - Total current liabilities 10,396 10,011 Deferred rent 44 13 Long-term loan, excluding current portion 5,980 7,964 -------- - -------- - Total long-term liabilities 6,024 7,977 Total liabilities 16,420 17,988 Commitments and contingencies Stockholders’ equity: Common stock, $0.001 par value; 100,000,000 and 300,000,000 shares authorized as of June 30, 2018 and December 31, 2017, respectively; 17,858,704 and 17,500,604 shares 18 18 issued and outstanding as of June 30, 2018 and December 31, 2017, respectively Additional paid-in capital 149,285 146,474 Accumulated other comprehensive gain (loss) 1 (5 ) Accumulated deficit (133,253 ) (111,374 ) -------- - -------- - Total stockholders’ equity 16,051 35,113 -------- - -------- - Total liabilities and stockholders’ equity $ 32,471 $ 53,101 - ------ - - ------ -

OBALON THERAPEUTICS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)

Six Months Ended June 30, 2018 2017 ----------- ----------- (Unaudited) Operating activities: Net loss $ (21,879 ) $ (15,475 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 276 136 Stock-based compensation 2,603 1,079 Loss on disposal of fixed assets 107 — (Accretion) amortization of investment (discount) premium, net (7 ) 11 Amortization of debt discount 22 20 Change in operating assets and liabilities: Accounts receivable, net 1,174 (1,757 ) Accounts receivable from related party — 515 Inventory (424 ) 80 Other current assets 857 539 Accounts payable 275 58 Accrued compensation (2,362 ) (116 ) Accrued clinical expenses 418 91 Deferred revenue (208 ) 85 Other current and long term liabilities 424 326 Net cash used in operating activities (18,724 ) (14,408 ) Investing activities: Purchases of short-term investments (995 ) (64,928 ) Maturities of short-term investments 23,301 12,500 Purchase of property and equipment (657 ) (559 ) --------- - --------- - Net cash provided by (used in) investing activities 21,649 (52,987 ) Financing activities: Proceeds from stock issued under employee stock purchase plan 148 210 Proceeds from sale of common stock upon exercise of stock options 31 37 --------- - --------- - Net cash provided by financing activities 179 247 --------- - --------- - Net increase (decrease) in cash and cash equivalents 3,104 (67,148 ) Cash and cash equivalents at beginning of period 21,108 72,975 --------- - --------- - Cash and cash equivalents at end of period $ 24,212 $ 5,827 - ------- - - ------- - Supplemental cash flow information: Interest paid $ 307 $ 270 - ------- - - ------- - Property and equipment in accounts payable $ 106 $ 96 - ------- - - ------- -

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