PART I – FINANCIAL INFORMATION This section provides ReShape Lifesciences Inc.'s unaudited financial statements, management's discussion, and related disclosures [ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)](index=4&type=section&id=ITEM%201.%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(unaudited)) This section presents ReShape Lifesciences Inc.'s unaudited condensed consolidated financial statements and notes, showing improved cash, assets, and equity, alongside a reduced net loss [Condensed Consolidated Balance Sheets](index=4&type=page&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows significant increases in total assets and cash, with a shift to positive stockholders' equity | Metric | June 30, 2025 ($k) | December 31, 2024 ($k) | | :-------------------------- | :------------------- | :--------------------- | | Cash and cash equivalents | 4,123 | 693 | | Total current assets | 8,862 | 4,588 | | Total current liabilities | 3,199 | 4,985 | | Total assets | 9,028 | 4,793 | | Total stockholders' equity (deficit) | 5,829 | (253) | [Condensed Consolidated Statements of Operations](index=5&type=page&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenue and gross profit decreased, while net loss decreased for the six-month period due to a gain on liability warrants | Metric | Three Months Ended June 30, 2025 ($k) | Three Months Ended June 30, 2024 ($k) | Six Months Ended June 30, 2025 ($k) | Six Months Ended June 30, 2024 ($k) | | :--------------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Revenue | 1,242 | 1,965 | 2,355 | 3,909 | | Cost of revenue | 643 | 831 | 1,075 | 1,610 | | Gross profit | 599 | 1,134 | 1,280 | 2,299 | | Operating loss | (2,762) | (2,054) | (4,971) | (4,264) | | Net loss | (2,630) | (1,595) | (1,156) | (3,788) | | Loss (gain) on changes in fair value of liability warrants | (1) | 2 | (3,663) | (18) | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=page&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss increased for the three months but decreased for the six months, reflecting changes in net loss | Metric | Three Months Ended June 30, 2025 ($k) | Three Months Ended June 30, 2024 ($k) | Six Months Ended June 30, 2025 ($k) | Six Months Ended June 30, 2024 ($k) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Net loss | (2,630) | (1,595) | (1,156) | (3,788) | | Comprehensive loss | (2,629) | (1,588) | (1,161) | (3,789) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=page&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity significantly improved to a positive value due to new equity issuances and cashless warrant exercises | Metric | June 30, 2025 ($k) | December 31, 2024 ($k) | | :--------------------------------------- | :------------------- | :--------------------- | | Total stockholders' equity (deficit) | 5,829 | (253) | | Additional paid-in capital (increase for 6 months) | 649,798 | 642,555 | | Issuance of common stock (ATM offering, net) | 3,743 | — | | Issuance of common stock (Public Offering, net) | 2,358 | — | | Issuance of common stock (cashless warrant exercise) | 1,115 | — | [Condensed Consolidated Statements of Cash Flows](index=9&type=page&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by financing activities significantly improved overall cash flow, offsetting increased operating cash usage | Metric | Six Months Ended June 30, 2025 ($k) | Six Months Ended June 30, 2024 ($k) | | :--------------------------------------- | :---------------------------------- | :---------------------------------- | | Net cash used in operating activities | (6,613) | (3,429) | | Net cash provided by financing activities | 10,048 | 24 | | Net change in cash, cash equivalents and restricted cash | 3,430 | (3,406) | | Proceeds from sale and issuance of securities, net | 10,859 | — | [Notes to Condensed Consolidated Financial Statements](index=10&type=page&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail financial statement basis, accounting policies, and critical events, including reverse stock splits, pending merger, and going concern issues [Note 1. Basis of Presentation](index=10&type=page&id=Note%201.%20Basis%20of%20Presentation) Interim financials are GAAP-compliant, retroactively adjusted for reverse stock splits, and reflect a pending merger and asset sale - The company effected a **1-for-25 reverse stock split on May 9, 2025**, and a **1-for-58 reverse stock split on September 23, 2024**. All share and per share amounts have been **retroactively adjusted**[29](index=29&type=chunk)[30](index=30&type=chunk) - The company entered into an **Agreement and Plan of Merger with Vyome Therapeutics, Inc. on July 8, 2024**, with **Vyome surviving as a subsidiary** and the **combined company focusing on Vyome's immuno-inflammatory assets**[31](index=31&type=chunk) - Simultaneously, the company entered into an **Asset Purchase Agreement (amended April 25, 2025)** with **Ninjour Health International Limited** to sell **substantially all assets (excluding cash) for $2.25 million**. The merger and asset sale are **anticipated to close in the third quarter of 2025**[31](index=31&type=chunk)[32](index=32&type=chunk) | Transaction Costs | Three Months Ended June 30, 2025 ($k) | Three Months Ended June 30, 2024 ($k) | Six Months Ended June 30, 2025 ($k) | Six Months Ended June 30, 2024 ($k) | | :---------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Legal and audit fees | 700 | 200 | 1,000 | 300 | [Note 2. Liquidity and Management's Plans](index=14&type=page&id=Note%202.%20Liquidity%20and%20Management's%20Plans) The company faces **substantial doubt about its ability to continue as a going concern** due to insufficient revenue and cash burn, despite recent capital raises and strategic plans - The company currently **does not generate sufficient revenue to offset operating costs** and anticipates continued shortfalls, primarily due to the **introduction of GLP-1 pharmaceuticals**, raising **substantial doubt about its ability to continue as a going concern**[45](index=45&type=chunk)[50](index=50&type=chunk) | Metric | June 30, 2025 ($k) | | :-------------------------- | :----------------- | | Net working capital surplus | 5,700 | | Cash and cash equivalents | 4,100 | | Accounts receivable | 1,400 | | Accumulated deficit | (643,900) | - The company **raised $4.8 million from a February 2025 offering**, **$3.8 million from a June 2025 "at-the-market" offering**, and **$2.4 million from a June 2025 public offering**, **totaling $10.9 million in 2025**[46](index=46&type=chunk)[138](index=138&type=chunk) - Anticipated operations include **merging with Vyome**, **selling assets to Biorad**, **growing the Lap-Band product line**, **introducing Lap-Band 2.0 FLEX**, and **continuing development of the Diabetes Bloc-Stim Neuromodulation (DBSN) device**[47](index=47&type=chunk)[137](index=137&type=chunk) - Management expects to **run out of cash during the fourth quarter of 2025** at the current burn rate[138](index=138&type=chunk) [Note 3. Supplemental Balance Sheet Information](index=15&type=page&id=Note%203.%20Supplemental%20Balance%20Sheet%20Information) This note provides detailed breakdowns of inventory, prepaid expenses, and accrued liabilities, showing minor shifts | Inventory Category | June 30, 2025 ($k) | December 31, 2024 ($k) | | :----------------- | :----------------- | :--------------------- | | Raw materials | 771 | 753 | | Sub-assemblies | 911 | 1,024 | | Finished goods | 870 | 683 | | **Total inventory** | **2,552** | **2,460** | | Prepaid Expenses and Other Current Assets | June 30, 2025 ($k) | December 31, 2024 ($k) | | :---------------------------------------- | :----------------- | :--------------------- | | Prepaid insurance | 5 | 281 | | Patents | 38 | 14 | | Prepaid advertising and marketing | 73 | 12 | | Taxes | 30 | 41 | | Prepaid professional fees | 59 | — | | Prepaid inventory | 367 | — | | Other current assets | 135 | — | | **Total** | **707** | **348** | | Accrued and Other Liabilities | June 30, 2025 ($k) | December 31, 2024 ($k) | | :---------------------------- | :----------------- | :--------------------- | | Payroll and benefits | 570 | 694 | | Customer deposits | 854 | 720 | | Taxes | (5) | 30 | | Accrued professional | 113 | 200 | | Other liabilities | 54 | 44 | | **Total** | **1,586** | **1,688** | [Note 4. Leases](index=16&type=page&id=Note%204.%20Leases) The company leases office and warehouse space, with consistent operating lease costs and decreasing lease liabilities - **Operating lease costs were $0.1 million** for both the three and six months ended June 30, 2025 and 2024[56](index=56&type=chunk) | Metric | June 30, 2025 ($k) | December 31, 2024 ($k) | | :-------------------------------- | :----------------- | :--------------------- | | Operating lease ROU assets | 79 | 116 | | Operating lease liabilities, current | 104 | 115 | | Operating lease liabilities, long-term | — | 41 | | **Total operating lease liabilities** | **104** | **156** | | Weighted-average remaining lease term (years) | 0.9 | - | [Note 5. Equity](index=17&type=page&id=Note%205.%20Equity) No new restricted stock units or stock options were issued, but common stock issuances significantly increased equity - **No restricted stock units or stock options were issued or exercised** during the three and six months ended June 30, 2025 and 2024[59](index=59&type=chunk)[60](index=60&type=chunk) - In February 2025, the company completed a public offering of **103,005 shares and warrants**, generating **approximately $4.8 million in net proceeds**. Warrants were subsequently **cashless exercised into 576,416 shares**[63](index=63&type=chunk)[64](index=64&type=chunk) - In June 2025, the company **sold 830,918 shares** through an "at-the-market" offering, receiving **approximately $3.8 million in net proceeds**[67](index=67&type=chunk) - On June 9, 2025, the company completed a public offering of **1,054,604 shares at $2.50 per share**, generating **approximately $2.4 million in net proceeds**[68](index=68&type=chunk) [Note 6. Warrants](index=18&type=page&id=Note%206.%20Warrants) Warrant liabilities decreased to **zero** due to reclassification to equity upon cashless exercise and fair value changes | Metric | Common Stock Purchase Warrants ($k) | | :--------------------------------------- | :---------------------------------- | | Fair value as of February 8, 2023 (issuance) | 20 | | Additions: Fair value as of February 18, 2025 (issuance) | 4,758 | | Reclassification to equity upon cashless exercise | (1,115) | | Changes in fair value of liability warrants | (3,663) | | **Fair value as of June 30, 2025** | **—** | [Note 7. Revenue Disaggregation and Operating Segments](index=20&type=page&id=Note%207.%20Revenue%20Disaggregation%20and%20Operating%20Segments) The company operates as a single segment, experiencing revenue declines across all geographies - The company has one reportable segment, managed on a consolidated basis by the CEO, focused on the design and development of products and services that manage and treat obesity and metabolic disease[88](index=88&type=chunk) | Revenue by Geography | Three Months Ended June 30, 2025 ($k) | Three Months Ended June 30, 2024 ($k) | Change ($k) | Change (%) | | :------------------- | :------------------------------------ | :------------------------------------ | :---------- | :--------- | | United States | 1,092 | 1,663 | (571) | (34.3)% | | Australia | 68 | 103 | (35) | (34.0)% | | Europe | 81 | 198 | (117) | (59.1)% | | Rest of world | 1 | 1 | — | — % | | **Total revenue** | **1,242** | **1,965** | **(723)** | **(36.8)%** | | Revenue by Geography | Six Months Ended June 30, 2025 ($k) | Six Months Ended June 30, 2024 ($k) | Change ($k) | Change (%) | | :------------------- | :---------------------------------- | :---------------------------------- | :---------- | :--------- | | United States | 2,023 | 3,281 | (1,258) | (38.3)% | | Australia | 146 | 205 | (59) | (28.8)% | | Europe | 179 | 396 | (217) | (54.8)% | | Rest of world | 7 | 27 | (20) | (74.1)% | | **Total revenue** | **2,355** | **3,909** | **(1,554)** | **(39.8)%** | [Note 8. Income Taxes](index=20&type=page&id=Note%208.%20Income%20Taxes) Minimal income tax expense was recorded, with a full valuation allowance against deferred tax assets due to historical losses | Income Tax Expense | Three Months Ended June 30, 2025 ($k) | Three Months Ended June 30, 2024 ($k) | Six Months Ended June 30, 2025 ($k) | Six Months Ended June 30, 2024 ($k) | | :----------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Income tax expense | 8 | 15 | 14 | 28 | - **A full valuation allowance is provided** against net deferred tax assets due to historical losses, projections of future losses, and potential limitations under Internal Revenue Code Section 382[76](index=76&type=chunk) [Note 9. Stock-based Compensation](index=21&type=page&id=Note%209.%20Stock-based%20Compensation) Stock-based compensation expense decreased significantly, with remaining unrecognized expense for stock options | Stock-based Compensation Expense | Three Months Ended June 30, 2025 ($k) | Three Months Ended June 30, 2024 ($k) | Six Months Ended June 30, 2025 ($k) | Six Months Ended June 30, 2024 ($k) | | :------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Sales and marketing | 5 | 4 | 9 | 15 | | General and administrative | 1 | 26 | 3 | 51 | | Research and development | 6 | 35 | 15 | 71 | | **Total** | **12** | **65** | **27** | **137** | - As of June 30, 2025, stock options had **no intrinsic value**, and unrecognized share-based expense was **$22 thousand**, to be recognized over a weighted average period of **0.44 years**[78](index=78&type=chunk) - There was **no unrecognized compensation cost related to Restricted Stock Units (RSUs)** at June 30, 2025[81](index=81&type=chunk) [Note 10. Commitment and Contingencies](index=22&type=page&id=Note%2010.%20Commitment%20and%20Contingencies) The company faces a proposed class action lawsuit in Canada, but **no legal liability is currently deemed probable or estimable** - The company received notice of an application to be added as a defendant in a **proposed class action lawsuit in Canada** concerning the **Lap-Band gastric banding device**, alleging **high complication rates and inadequate warnings**[82](index=82&type=chunk)[83](index=83&type=chunk) - As of the report date, **no legal liability is determined to be probable or reasonably estimable**, and thus there are no implications on the condensed consolidated financial statements[85](index=85&type=chunk) [Note 11. Segment Reporting](index=23&type=page&id=Note%2011.%20Segment%20Reporting) The company operates as a single reportable segment focused on obesity and metabolic disease, with performance assessed by net loss - The company has one reportable segment, managed on a consolidated basis by the Chief Executive Officer (CODM), focused on the design and development of products and services that manage and treat obesity and metabolic disease[88](index=88&type=chunk) - The CODM assesses performance and allocates resources based on consolidated net loss[89](index=89&type=chunk) [Note 12. Subsequent Events](index=23&type=page&id=Note%2012.%20Subsequent%20Events) Stockholders approved key proposals for the merger, asset sale, and reverse stock split at a special meeting - Stockholders approved proposals including the issuance of common stock for the merger, the asset sale, amendments to the Company's Restated Certificate of Incorporation, and authorization for a reverse stock split (**1-for-2 to 1-for-5**) at a special meeting held on **July 24, 2025**, and partially adjourned to **August 7, 2025**[91](index=91&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, liquidity, and capital resources, highlighting revenue decline, increased transaction costs, and **going concern doubt** [Overview](index=24&type=page&id=Overview) ReShape Lifesciences Inc. is a physician-led weight-loss solutions company operating in the US, Australia, Europe, and the Middle East - ReShape Lifesciences Inc. is a premier physician-led weight-loss solutions company, offering an integrated portfolio of proven products and services that manage and treat obesity and associated metabolic disease[93](index=93&type=chunk) - Current portfolio includes the **Lap-Band Adjustable Gastric Banding System**, the **Obalon Balloon System**, and the **Diabetes Bloc-Stim Neuromodulation device** (under development)[93](index=93&type=chunk) - Primary operations are in the United States, Australia, and certain European and Middle Eastern countries[93](index=93&type=chunk) [Recent Developments](index=24&type=page&id=Recent%20Developments) The company provided promissory notes to Vyome and completed public offerings to fund operations and merger-related expenses - **Loaned $400,000 to Vyome Therapeutics, Inc. in April 2025** and an **additional $200,000 in June 2025** via promissory notes, bearing **8.0% interest**, to fund working capital and merger-related expenses[94](index=94&type=chunk)[100](index=100&type=chunk) - **Sold 830,918 shares** in an "at-the-market" offering in June 2025, generating **approximately $3.8 million in net proceeds**[96](index=96&type=chunk) - Completed a public offering of **1,054,604 shares at $2.50 per share** in June 2025, generating **approximately $2.4 million in net proceeds**[97](index=97&type=chunk) - Net proceeds from public offerings are intended for general corporate purposes, including expenses related to the proposed merger with Vyome and asset sale[98](index=98&type=chunk) [Pending Merger and Asset Sale](index=26&type=page&id=Pending%20Merger%20and%20Asset%20Sale) ReShape is merging with Vyome and selling assets to Ninjour Health, with stockholder approval and anticipated Q3 2025 closing - The company entered into a **Merger Agreement with Vyome Therapeutics, Inc. on July 8, 2024**, where **Vyome will survive as a subsidiary**, and the **combined company will focus on Vyome's immuno-inflammatory assets**[101](index=101&type=chunk) - An **Asset Purchase Agreement (amended April 25, 2025)** was made with **Ninjour Health International Limited** to sell **substantially all assets (excluding cash) for $2.25 million**[102](index=102&type=chunk) - **Stockholders approved all proposals** related to the merger and asset sale at a special meeting held on **July 24, 2025**. The closing is **anticipated in the third quarter of 2025**, assuming conditions are satisfied[103](index=103&type=chunk) - The completion of the Merger and Asset Sale remains subject to conditions, and **failure to complete could negatively impact future operations, financial results, and stock price**[104](index=104&type=chunk) [Reverse Stock Split](index=28&type=page&id=Reverse%20Stock%20Split) The company effected **1-for-25** (May 2025) and **1-for-58** (Sept 2024) reverse stock splits, retroactively adjusting all share amounts - A **1-for-25 reverse stock split was effective on May 9, 2025**[106](index=106&type=chunk) - A **1-for-58 reverse stock split was effective on September 23, 2024**[107](index=107&type=chunk) [Results of Operations](index=28&type=page&id=Results%20of%20Operations) Revenue and gross profit declined significantly due to market competition, while transaction costs surged amid merger activities [Three months ended June 30, 2025 and June 30, 2024](index=30&type=page&id=Three%20months%20ended%20June%2030,%202025%20and%20June%2030,%202024) Q2 2025 saw revenue and gross profit declines, with operating expenses increasing due to higher transaction costs | Metric | Q2 2025 ($k) | Q2 2024 ($k) | Change ($k) | Change (%) | | :----------------------- | :----------- | :----------- | :---------- | :--------- | | Revenue | 1,242 | 1,965 | (723) | (36.8)% | | Gross profit | 599 | 1,134 | (535) | (47.2)% | | Total operating expenses | 3,361 | 3,188 | 173 | 5.4% | - The **decrease in revenue was primarily due to GLP-1 pharmaceutical weight-loss alternatives** and **reduced sales and marketing expenditures**, along with a **shift in focus toward activities related to the Merger**[114](index=114&type=chunk) - **Gross profit as a percentage of total revenue decreased from 57.7% in Q2 2024 to 48.2% in Q2 2025**, primarily attributable to **lower sales volumes impacting fixed cost absorption**[116](index=116&type=chunk) [Revenue](index=30&type=page&id=Revenue) Q2 2025 revenue decreased by **$0.7 million** (**36.8%**) due to GLP-1 competition and reduced sales efforts across all regions | Region | Q2 2025 ($k) | Q2 2024 ($k) | Change ($k) | Change (%) | | :------------ | :----------- | :----------- | :---------- | :--------- | | United States | 1,092 | 1,663 | (571) | (34.3)% | | Australia | 68 | 103 | (35) | (34.0)% | | Europe | 81 | 198 | (117) | (59.1)% | | Rest of world | 1 | 1 | — | — % | | **Total revenue** | **1,242** | **1,965** | **(723)** | **(36.8)%** | [Cost of Goods Sold and Gross Profit](index=31&type=page&id=Cost%20of%20Goods%20Sold%20and%20Gross%20Profit) Gross profit for Q2 2025 declined by **47.2%**, with the gross profit percentage decreasing due to lower sales volumes | Metric | Q2 2025 ($k) | Q2 2024 ($k) | Change ($k) | Change (%) | | :------------ | :----------- | :----------- | :---------- | :--------- | | Cost of revenue | 643 | 831 | (188) | (22.6)% | | Gross profit | 599 | 1,134 | (535) | (47.2)% | | Gross profit % | 48.2% | 57.7% | - | - | [Operating Expense](index=31&type=page&id=Operating%20Expense) Total operating expenses for Q2 2025 increased by **5.4%**, driven by a significant rise in merger-related transaction costs | Operating Expense | Q2 2025 ($k) | Q2 2024 ($k) | Change ($k) | Change (%) | | :------------------------ | :----------- | :----------- | :---------- | :--------- | | Sales and marketing | 583 | 670 | (87) | (13.0)% | | General and administrative | 1,591 | 1,906 | (315) | (16.5)% | | Research and development | 476 | 399 | 77 | 19.3% | | Transaction costs | 711 | 213 | 498 | 40.1% | | **Total operating expenses** | **3,361** | **3,188** | **173** | **5.4%** | [Sales and Marketing Expense](index=31&type=page&id=Sales%20and%20Marketing%20Expense) Sales and marketing expenses **decreased by $0.1 million, or 13.0%** due to reduced payroll and sales personnel changes - **Sales and marketing expenses decreased by $0.1 million, or 13.0%, to $0.6 million in Q2 2025**, primarily due to a **decrease of $0.1 million in payroll-related expenditures**, including commissions, stock compensation expense and travel, due to changes in sales personnel and a reduction in sales[117](index=117&type=chunk) [General and Administrative Expense](index=31&type=page&id=General%20and%20Administrative%20Expense) General and administrative expenses **decreased by $0.3 million, or 16.5%** due to reduced legal, audit, and professional fees to conserve cash - **General and administrative expenses decreased by $0.3 million, or 16.5%, to $1.6 million in Q2 2025**, primarily due to a **reduction in general legal, audit, and other professional fees**, as the Company reduced its reliance on consultants and professional services to **conserve cash**[118](index=118&type=chunk) [Research and Development Expense](index=31&type=page&id=Research%20and%20Development%20Expense) Research and development expenses **increased by $0.1 million, or 19.3%** due to higher payroll-related expenditures, including severance costs - **Research and development expenses increased by $0.1 million, or 19.3%, to $0.5 million in Q2 2025**, primarily driven by **higher payroll-related expenditures** resulting from **increased accrued severance costs** in connection with the departure of the Vice President of Regulatory[119](index=119&type=chunk) [Transaction Costs](index=31&type=page&id=Transaction%20Costs) Transaction costs **increased by $0.5 million, or 40.1%** due to legal and audit fees associated with the pending merger and asset sale - **Transaction costs increased by $0.5 million, or 40.1%, to $0.7 million in Q2 2025**, primarily consisting of **legal fees and audit-related fees** incurred in connection with the Company's **pending Merger and Asset Sale**[120](index=120&type=chunk) [Six months ended June 30, 2025 and June 30, 2024](index=32&type=page&id=Six%20months%20ended%20June%2030,%202025%20and%20June%2030,%202024) H1 2025 revenue and gross profit declined, while total operating expenses decreased despite surging transaction costs | Metric | H1 2025 ($k) | H1 2024 ($k) | Change ($k) | Change (%) | | :----------------------- | :----------- | :----------- | :---------- | :--------- | | Revenue | 2,355 | 3,909 | (1,554) | (39.8)% | | Gross profit | 1,280 | 2,299 | (1,019) | (44.3)% | | Total operating expenses | 6,251 | 6,563 | (312) | (4.8)% | - The **decrease in revenue was primarily due to GLP-1 pharmaceutical weight-loss alternatives** and **reduced sales and marketing expenditures**, along with a **shift in focus toward activities related to the Merger**[121](index=121&type=chunk) - **Gross profit as a percentage of total revenue decreased from 58.8% in H1 2024 to 54.4% in H1 2025**, primarily attributable to **lower sales volumes impacting fixed cost absorption**[122](index=122&type=chunk) [Revenue](index=32&type=page&id=Revenue) H1 2025 revenue decreased by **$1.6 million** (**39.8%**) due to GLP-1 competition and a shift in focus to merger-related activities | Region | H1 2025 ($k) | H1 2024 ($k) | Change ($k) | Change (%) | | :------------ | :----------- | :----------- | :---------- | :--------- | | United States | 2,023 | 3,281 | (1,258) | (38.3)% | | Australia | 146 | 205 | (59) | (28.8)% | | Europe | 179 | 396 | (217) | (54.8)% | | Rest of world | 7 | 27 | (20) | (74.1)% | | **Total revenue** | **2,355** | **3,909** | **(1,554)** | **(39.8)%** | [Cost of Goods Sold and Gross Profit](index=32&type=page&id=Cost%20of%20Goods%20Sold%20and%20Gross%20Profit) Gross profit for H1 2025 declined by **44.3%**, with the gross profit percentage decreasing due to lower sales volumes | Metric | H1 2025 ($k) | H1 2024 ($k) | Change ($k) | Change (%) | | :------------ | :----------- | :----------- | :---------- | :--------- | | Cost of revenue | 1,075 | 1,610 | (535) | (33.2)% | | Gross profit | 1,280 | 2,299 | (1,019) | (44.3)% | | Gross profit % | 54.4% | 58.8% | - | - | [Operating Expense](index=32&type=page&id=Operating%20Expense) Total operating expenses for H1 2025 decreased by **4.8%**, primarily due to reductions in sales & marketing and G&A | Operating Expense | H1 2025 ($k) | H1 2024 ($k) | Change ($k) | Change (%) | | :------------------------ | :----------- | :----------- | :---------- | :--------- | | Sales and marketing | 1,112 | 1,689 | (577) | (34.2)% | | General and administrative | 3,256 | 3,666 | (410) | (11.2)% | | Research and development | 840 | 883 | (43) | (4.9)% | | Transaction costs | 1,043 | 325 | 718 | 220.9% | | **Total operating expenses** | **6,251** | **6,563** | **(312)** | **(4.8)%** | [Sales and Marketing Expense](index=32&type=page&id=Sales%20and%20Marketing%20Expense) Sales and marketing expenses **decreased by $0.6 million, or 34.2%** due to reduced payroll and a shift to targeted digital marketing - **Sales and marketing expenses decreased by $0.6 million, or 34.2%, to $1.1 million in H1 2025**, primarily due to a **decrease of approximately $0.4 million in payroll-related expenditures** and a **$0.1 million reduction in advertising and marketing expenses** due to a **shift to targeted digital marketing**[123](index=123&type=chunk)[124](index=124&type=chunk) [General and Administrative Expense](index=34&type=page&id=General%20and%20Administrative%20Expense) General and administrative expenses **decreased by $0.4 million, or 11.2%** due to reduced reliance on consultants and professional services - **General and administrative expenses decreased by $0.4 million, or 11.2%, to $3.3 million in H1 2025**, primarily due to a **reduction in general legal, audit, and other professional fees**, as the Company reduced its reliance on consultants and professional services to **conserve cash**[125](index=125&type=chunk) [Research and Development Expense](index=34&type=page&id=Research%20and%20Development%20Expense) Research and development expenses **decreased by $0.1 million, or 4.9%** due to paused clinical work, partially offset by severance costs - **Research and development expenses decreased by $0.1 million, or 4.9%, to $0.8 million in H1 2025**, primarily due to a **reduction in consulting and clinical trials** as the Company has **paused all clinical work to preserve cash**. This was partially offset by **higher payroll-related expenditures from increased accrued severance costs**[126](index=126&type=chunk) [Transaction Costs](index=34&type=page&id=Transaction%20Costs) Transaction costs **surged by $0.7 million, or 220.9%** due to legal and audit fees associated with the pending merger and asset sale - **Transaction costs increased by $0.7 million, or 220.9%, to $1.0 million in H1 2025**, primarily consisting of **legal fees and audit-related fees** incurred in connection with the Company's **pending Merger and Asset Sale**[127](index=127&type=chunk) [Liquidity and Capital Resources](index=34&type=page&id=Liquidity%20and%20Capital%20Resources) The company raised **$10.9 million** in H1 2025 but expects to run out of cash by **Q4 2025**, raising **going concern doubt** - The company financed operations principally through the sale of equity securities and debt financings, **raising $10.9 million in public offerings of common shares and stock warrants in 2025**[128](index=128&type=chunk)[138](index=138&type=chunk) | Metric | Six Months Ended June 30, 2025 ($k) | Six Months Ended June 30, 2024 ($k) | | :--------------------------------------- | :---------------------------------- | :---------------------------------- | | Net cash used in operating activities | (6,613) | (3,429) | | Net cash provided by financing activities | 10,048 | 24 | | Net change in cash and cash equivalents and restricted cash | 3,430 | (3,406) | | Cash, cash equivalents and restricted cash at end of period | 4,223 | 1,153 | - As of June 30, 2025, the company had **$4.1 million of cash and cash equivalents** and **$100 thousand of restricted cash**[128](index=128&type=chunk) - Management expects to **run out of cash during the fourth quarter of 2025** at the current burn rate[138](index=138&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=page&id=Critical%20Accounting%20Policies%20and%20Estimates) **No material changes** occurred in critical accounting policies and estimates from the 2024 Annual Report on Form 10-K - There have been **no significant changes** to the company's critical accounting policies and estimates from those discussed in its Annual Report on Form 10-K for the year ended December 31, 2024[140](index=140&type=chunk)[141](index=141&type=chunk) [Recent Accounting Pronouncements](index=36&type=page&id=Recent%20Accounting%20Pronouncements) Refer to Note 1 for a discussion of recent accounting pronouncements - **Refer to Note 1** to the condensed consolidated financial statements for a discussion of recent accounting pronouncements[142](index=142&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=36&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, ReShape Lifesciences Inc. is **not required to provide market risk disclosures** - As a smaller reporting company, ReShape Lifesciences Inc. is **not required to provide disclosure** pursuant to this item[143](index=143&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=38&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Internal control over financial reporting was **ineffective** due to **material weaknesses**, with ongoing remediation efforts [Evaluation of Disclosure Controls and Procedures](index=38&type=page&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Internal control over financial reporting was **not effective** due to **material weaknesses** in accounting expertise, journal entry controls, and IT security - Management assessed the effectiveness of internal control over financial reporting as of June 30, 2025, and determined it was **not effective at a reasonable assurance level**[144](index=144&type=chunk) - **Material weaknesses identified** include: **insufficient internal resources with appropriate accounting and finance knowledge and expertise**, leading to a **lack of management review** over several areas (e.g., obsolete inventory, accounts payable, functional currency, EPS, stock-based compensation)[144](index=144&type=chunk) - Additional **material weaknesses** include **ineffective processes for journal entry approval and segregation of duties**, **IT access change and IT security risks**, and **deficiencies in financial reporting controls for inventory capitalization, income taxes, and purchase accounting**[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - **Remediation plans include formalizing roles and review responsibilities**, **implementing formal processes for financial close**, and **designing formal review of monthly journal entry reports**[150](index=150&type=chunk)[151](index=151&type=chunk) [Changes in Internal Control over Financial Reporting](index=39&type=page&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) **No material changes** occurred in internal controls, other than ongoing remediation for identified weaknesses - **No material changes in internal controls over financial reporting occurred** during the quarter ended June 30, 2025, other than in connection with executing upon the **continued implementation of remediation measures for identified material weaknesses**[152](index=152&type=chunk) PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=39&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company faces a proposed class action lawsuit in Canada, but **no legal liability is currently deemed probable or estimable** - The company is subject to an application to be added as a defendant in a **proposed class action lawsuit in Canada** regarding the **Lap-Band gastric banding device**, alleging an **unacceptably high rate of complications**[154](index=154&type=chunk)[155](index=155&type=chunk) - As of the report date, **no legal liability is determined to be probable or reasonably estimable**, and thus there are no implications on the condensed consolidated financial statements[157](index=157&type=chunk) [ITEM 1A. RISK FACTORS](index=41&type=section&id=ITEM%201A.%20RISK%20FACTORS) **No material changes** occurred to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K - There have been **no material changes** to the risk factors set forth in Item 1A. "Risk Factors" of the company's 2024 Annual Report on Form 10-K filed on April 4, 2025[159](index=159&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=41&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) **No unregistered sales of equity securities**, uses of proceeds from registered securities, or equity purchases were reported - **No unregistered sales of equity securities occurred** during the period[160](index=160&type=chunk) - **No uses of proceeds from the sale of registered securities were reported**[161](index=161&type=chunk) - **No purchases of equity securities were made** during the period[162](index=162&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=41&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) **No defaults upon senior securities** were reported during the period - **No defaults upon senior securities were reported** during the period[163](index=163&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=41&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is **not applicable to the company** - This item is **not applicable to the company**[164](index=164&type=chunk) [ITEM 5. OTHER INFORMATION](index=41&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - **None of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement** during the three months ended June 30, 2025[165](index=165&type=chunk) [ITEM 6. EXHIBITS](index=42&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including merger agreements, promissory notes, and certifications - The exhibits include the **Agreement and Plan of Merger**, **Asset Purchase Agreement**, amendments, **promissory notes**, **equity distribution agreements**, and various certifications (e.g., **CEO and CFO certifications**)[166](index=166&type=chunk) SIGNATURES [SIGNATURES](index=44&type=section&id=SIGNATURES) The report was signed by the President and CEO, and Senior VP and CFO on August 14, 2025 - The report was signed by **Paul F. Hickey, President and Chief Executive Officer**, and **Thomas Stankovich, Senior Vice President and Chief Financial Officer**[170](index=170&type=chunk) - The report was dated **August 14, 2025**[170](index=170&type=chunk)

Summary of ReShape Lifesciences Inc. Special Meeting Company Overview - **Company**: ReShape Lifesciences Inc. (RSLS) - **Date of Meeting**: August 07, 2025 - **Key Participants**: Paul Hickey (CEO), Tom Stankovich (CFO), Brett Hansen (Legal Counsel), Christina Vico (Inspector of Elections) Core Proposals Discussed 1. **Proposal Two**: Approval for the sale of substantially all of ReShape's assets - This proposal was a key focus of the meeting and was presented for voting [2][5] 2. **Proposal Three**: Approval and adoption of proposed amendments to ReShape's certificate of incorporation in connection with the proposed merger with Viome Therapeutics - This proposal was also highlighted for stockholder voting [2][5] Voting Process - The meeting was reconvened to allow stockholders to vote on the two proposals after a prior adjournment on July 24, 2025 [2][3] - Stockholders were informed that they could vote via a web portal or had the option to change their votes if they had already submitted them [4] - A quorum was confirmed to be present for the conduct of business [3] Preliminary Results - Preliminary results indicated that both proposals were approved by the stockholders [6] - The final vote tally is to be reported in a Form 8-K to be filed with the SEC within four business days following the meeting [6] Additional Notes - The meeting was conducted in a structured manner with designated roles for the participants, ensuring a formal process for the voting and discussion of proposals [3] - The focus on asset sale and merger indicates a significant strategic shift for ReShape Lifesciences, which may impact its future operations and market positioning [2][5]

Core Viewpoint - ReShape Lifesciences has partially adjourned its Special Meeting of Stockholders to allow more time for soliciting proxies regarding the Asset Sale Proposal and Charter Amendment Proposal, which are essential for the completion of its merger with Vyome Therapeutics [1][2][3] Group 1: Company Overview - ReShape Lifesciences is a leading company in weight loss and metabolic health solutions, offering a range of products including the FDA-approved Lap-Band System and investigational technologies for treating obesity and metabolic disorders [9] - Vyome Therapeutics focuses on developing a healthcare platform that leverages clinical-stage assets to address immune-inflammatory conditions, with plans for a reverse merger with ReShape Lifesciences [7] - Biorad Medisys Pvt. Ltd. is a growing med-tech company that specializes in precision-engineered medical devices across various segments, including urology and gastroenterology [8] Group 2: Proposals and Voting - The Asset Sale Proposal involves the sale of substantially all of ReShape's assets to Ninjour Health International Limited, an affiliate of Biorad Medisys, and is crucial for the merger [1][2] - The Charter Amendment Proposal seeks to amend ReShape's certificate of incorporation in connection with the merger, and its approval is also necessary for the operation of the combined company post-merger [3][4] - Stockholders are encouraged to vote in favor of both proposals, with the Special Meeting of Stockholders set to reconvene on August 7, 2025 [3][4]

Core Insights - ReShape Lifesciences is hosting its inaugural Lap-Band® Surgeon Summit from August 1-3, 2025, in Nashville, Tennessee, directed by Dr. Christine Ren-Fielding, a leading expert in bariatric surgery [1][2] - The Summit aims to enhance collaboration with top Lap-Band® surgeons to improve patient outcomes and expand access to the Lap-Band® system, including the new Lap-Band® 2.0 FLEX [2][3] Company Overview - ReShape Lifesciences is a premier company in weight loss and metabolic health solutions, offering a range of products including the FDA-approved Lap-Band® System, which provides a minimally invasive treatment for obesity [4] - The company also has investigational products like the Diabetes Bloc-Stim Neuromodulation™ (DBSN™) system for type 2 diabetes and the Obalon® balloon technology for non-surgical weight loss [4] Product Focus - The Summit will discuss the benefits of the original Lap-Band® and the next-generation Lap-Band® 2.0 FLEX, emphasizing the integration of GLP-1 medications in patient care and strategies for patient education [2][3] - Early feedback from the limited U.S. market release of the Lap-Band® 2.0 FLEX has been overwhelmingly positive, indicating strong market interest and potential for growth [2]

Core Viewpoint - ReShape Lifesciences' Board of Directors unanimously recommends a merger with Vyome Therapeutics and an asset sale to Biorad Medisys, believing these actions are in the best interests of the company and its shareholders [2][3]. Group 1: Merger and Asset Sale Details - The merger with Vyome Therapeutics aims to enhance the development of immune-inflammatory assets and leverage opportunities between the US and India [3]. - The asset sale involves transferring substantially all of ReShape's assets to Biorad Medisys, which is expected to facilitate the company's transformation [2][3]. - Independent proxy advisory firms ISS and Glass Lewis have recommended shareholders vote in favor of the merger and asset sale proposals [2]. Group 2: Shareholder Engagement - The company emphasizes the importance of shareholder votes, urging all shareholders to vote in favor of the proposals related to the issuance of common stock, asset sale, and board composition amendments [3][4]. - Shareholders who have not yet voted are encouraged to do so, and those who voted against the proposals are asked to reconsider [4][6]. Group 3: Company Backgrounds - ReShape Lifesciences specializes in weight loss and metabolic health solutions, offering products like the FDA-approved Lap-Band® System and the investigational Diabetes Bloc-Stim Neuromodulation™ system [11]. - Vyome Therapeutics focuses on developing therapies for immune-inflammatory conditions and plans to leverage its clinical-stage assets for growth [9]. - Biorad Medisys is a med-tech company with a focus on precision-engineered medical devices and has recently expanded its operations internationally [10].

Core Insights - ReShape Lifesciences announced the issuance of U.S. Patent 12,350,179 for an intragastric device, enhancing its intellectual property portfolio [1][2] - The patent covers a swallowable capsule with a self-sealing fill valve and a degradable release valve, designed for natural excretion after deflation [1] - The patent protection extends to at least January 2031, potentially longer with a Patent Term Extension [1] Intellectual Property Development - The company has secured over 50 patents related to its intragastric balloon technology since its initial filing in 2011, contributing to a total of over 160 issued and pending patents [2] - This robust patent portfolio positions the company to defend its competitive edge and support its innovation pipeline [2] Company Overview - ReShape Lifesciences specializes in weight loss and metabolic health solutions, offering products like the FDA-approved Lap-Band systems and the non-surgical Obalon balloon technology [3] - The company aims to provide integrated solutions for managing obesity and metabolic diseases [3] Recent Transactions - ReShape has entered into an asset purchase agreement with Biorad Medisys, agreeing to sell substantially all of its assets, including the Lap-Band and Obalon systems [4]

Core Points - ReShape Lifesciences Inc. has regained compliance with Nasdaq's stockholders equity requirement, closing the listing matter [1][2] - The company previously faced potential delisting due to non-compliance with the minimum stockholders' equity requirement of $2.5 million [2] - As of March 31, 2025, the company's stockholders' equity was reported at $1.2 million [3] - The company raised a total of approximately $6.3 million through the sale of common stock in June 2025, which helped it regain compliance [3] Company Overview - ReShape Lifesciences is a leading company in weight loss and metabolic health solutions, offering a range of products and services for obesity and metabolic disease management [4] - The company provides the FDA-approved Lap-Band® System, which is a minimally invasive treatment for obesity [4] - Other offerings include an investigational vagal neuromodulation system for type 2 diabetes and metabolic disorders, and the non-surgical Obalon® balloon technology for weight loss [4]

Core Insights - ReShape Lifesciences Inc. announced a strategic headcount reduction aimed at saving over $750,000 annually, which represents approximately 23.4% of its payroll expenses [1][2] - The company is progressing towards finalizing a merger agreement with Vyome Therapeutics and an asset purchase agreement with Biorad Medisys, with a special shareholder meeting scheduled for July 24, 2025, to vote on these transactions [1][2] Company Overview - ReShape Lifesciences is a leading provider of weight loss and metabolic health solutions, offering a range of products including the FDA-approved Lap-Band System, which provides a minimally invasive treatment for obesity [3] - The company also has investigational products such as a vagal neuromodulation system for type 2 diabetes and the Obalon balloon technology for non-surgical weight loss [3] Strategic Focus - The company aims to maintain its core capabilities while enhancing operational efficiency through workforce reduction, ensuring that its sales and marketing team remains intact to drive patient leads via digital marketing [2] - ReShape is also focusing on international expansion efforts in Canada through a distribution agreement with Liaison Medical to launch the enhanced Lap-Band 2.0 FLEX [2]

Core Insights - ReShape Lifesciences has been granted an international patent for its Diabetes Neuromodulation technology, which aims to improve glycemic control in Type 2 diabetes patients [1][2] - The technology utilizes a proprietary vagus nerve block (vBloc™) system combined with bioelectronic modulation to manage glucose levels effectively [2][3] - The patent protection extends until April 12, 2039, enhancing the company's intellectual property position and commercial prospects [1][2] Company Overview - ReShape Lifesciences is a leading company in weight loss and metabolic health solutions, offering a range of products including the FDA-approved Lap-Band® systems and Obalon® balloon technology [4] - The company is focused on innovative approaches to treat obesity and metabolic diseases, with a strong emphasis on personalized medicine [3][4] Technology Details - The Diabetes Neuromodulation system is designed to deliver targeted electrical signals to regulate insulin release and glucose levels, showing promise in preclinical studies [2][3] - The system is considered superior to traditional vagus nerve stimulation methods, as it minimizes side effects and allows for adjustable treatment [3] Market Position - The granting of the Australian patent is seen as a significant milestone that underscores the global relevance of the company's technology and its potential to reduce reliance on daily medications for diabetes management [2] - ReShape Lifesciences holds a robust intellectual property portfolio with 63 issued or pending patents, covering various aspects of its technology [2]

Merger and Company Overview - Vyome Therapeutics intends to list on Nasdaq via reverse merger with $RSLS under the ticker $HIND[7] - The merger valuation is $120 million[42] - The company is building a 3-pillared healthcare platform in the US-India innovation corridor[7, 11] Market Opportunity and Assets - The immuno-inflammatory market is expected to reach $125 billion+ by 2028[8] - Vyome's assets include treatments for Malignant Fungating Wound (MFW), Uveitis, and Inflammatory acne[19] - The market size for Malignant Fungating Wound is estimated at $2.5 billion by 2032[19] - The total global acne market is forecasted to grow to $11.6 billion by 2028, with inflammatory acne comprising over 50% of the acne market[19] MFW Program - The MFW market represents a ~$1 billion/year unmet need with no approved drug[21, 26] - New data released in December 2024 shows a 75%+ reduction in odor and 50%+ increase in quality of life with Vyome's drug for MFW[27] Valuation and Comparables - Public comparables in the Inflammation & Immunology Market have an average market cap of $419 million[47] - Precedent M&A comparables in the Acquired Inflammation & Immunology Market have an average market cap of $2.8 billion and a transaction price of $482 million[51]