HIND

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2024, for ReShape Lifesciences Inc. (trading symbol: RSLS). The company is a physician-led weight-loss solutions provider focused on the Lap-Band System, Lap-Band 2.0 FLEX, and the Obalon Balloon System. The filing notes a pending all-stock merger with Vyome Therapeutics, Inc., under which the combined entity will be named Vyome Holdings, Inc. and will focus on Vyome's immuno-inflammatory assets. Simultaneously, ReShape has agreed to sell substantially all of its assets to Ninjour Health International Limited for approximately $5.16 million in cash. The company effected a 1-for-58 reverse stock split on September 23, 2024.

Key Financial Metrics

Note: A senior secured convertible note of $833,333 was issued in October 2024 and repaid in full on February 18, 2025.

Material Changes vs. Prior Period

• Revenue Decline: Revenue decreased 7.7% to $8.0 million, primarily due to market headwinds from GLP-1 pharmaceuticals. While Lap-Band 2.0 units increased 6.5%, accessory sales dropped 26.4% in the U.S.
• Cost Reduction: Operating expenses decreased 38.9% to $12.8 million. Sales and marketing expenses dropped 60.4% due to a shift to targeted digital marketing and workforce reductions. General and administrative expenses fell 32.9% due to reduced professional fees and payroll.
• Impairment Charges: Impairment of long-lived assets decreased significantly from $0.8 million in 2023 to $36,000 in 2024.
• Non-GAAP Adjusted EBITDA: Improved from a loss of $13.6 million in 2023 to a loss of $6.3 million in 2024.
• Financing Activity: In February 2025 (subsequent to year-end), the company raised approximately $4.5 million net in a public offering of common stock and warrants.

Guidance, Outlook, and Risks

Going Concern: The company has raised substantial doubt about its ability to continue as a going concern. As of December 31, 2024, cash resources were insufficient to fund operations for more than 12 months without the completion of the pending merger and asset sale or additional financing.

Merger and Asset Sale: The company anticipates closing the merger with Vyome and the asset sale to Ninjour in the second quarter of 2025, subject to stockholder and Nasdaq approval. Failure to close these transactions could negatively impact future operations.

Internal Controls: Management identified material weaknesses in internal control over financial reporting as of December 31, 2024. Issues included insufficient accounting resources, lack of management review over inventory and accounts payable, and segregation of duties conflicts regarding journal entries.

Product Pipeline: The Lap-Band 2.0 FLEX received FDA approval in December 2023 and Health Canada approval in 2024. The Obalon Balloon System is not currently manufactured for commercial sales but is expected to be available late in 2025 via a partnership with Biorad Medisys. The DBSN device for diabetes remains in development.

Investor Verification Checklist

• Merger Closing Conditions: Verify the status of stockholder approvals and Nasdaq listing requirements for the Vyome merger and the Ninjour asset sale.
• Liquidity Runway: Confirm the company's cash burn rate and the sufficiency of the $4.5 million raised in February 2025 to fund operations until the merger closes.
• Internal Control Remediation: Review the progress of the remediation plan for the identified material weaknesses in financial reporting.
• Warrant Dilution: Assess the potential dilution from the February 2025 warrant offering, which includes a "zero exercise price" alternative that could significantly increase share count.
• Asset Sale Proceeds: Monitor the final purchase price adjustment for the $5.16 million asset sale based on actual accounts receivable and payable at closing.