S-1/A: ReShape Lifesciences Eyes Capital Raise Amidst Pending Merger and Asset Sale

ReShape Lifesciences is seeking to raise capital through a unit offering to fund operations while it awaits the closing of its merger with Vyome Therapeutics and the sale of its assets to Ninjour Health International.

Summary

• ReShape Lifesciences is offering up to 1,779,360 units, each consisting of one share of common stock or a pre-funded warrant and one warrant, at an assumed price of $2.81 per unit.
• The company is also offering pre-funded warrants as an alternative for purchasers whose beneficial ownership would exceed 4.99% or 9.99% of the outstanding common stock.
• The warrants will be exercisable after stockholder approval and will expire 12 days after approval or 60 days after approval, depending on the merger closing date.
• The company does not expect to receive any cash proceeds from the exercise of the warrants due to an alternative cashless exercise option.
• The offering is on a best-efforts basis with no minimum amount required to close, and is expected to be completed by February 18, 2025.
• Maxim Group LLC is acting as the exclusive placement agent.
• The company intends to use the net proceeds for general corporate purposes, including expenses related to the proposed merger with Vyome and asset sale to Ninjour.
• Up to 50% of the net proceeds may be used to prepay the amount owed to Ascent under a Convertible Note transaction.
• The company has entered into an equity purchase agreement with Ascent Partners Fund LLC, where Ascent has agreed to purchase up to $5,000,000 of common stock over a 36-month period.
• A merger agreement is in place with Vyome Therapeutics, and an asset purchase agreement is in place with Ninjour Health International Limited, with the transactions expected to close in the second quarter of 2025.
• The combined company intends to change its name to Vyome Holdings, Inc. and will focus on Vyomes business.
• The completion of the merger and asset sale is subject to stockholder approval and other conditions.
• ReShape effected a 1-for-58 reverse stock split on September 23, 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While there are positive aspects such as the pending merger and asset sale, the company's financial performance and the risks associated with the offering and the business warrant a neutral to slightly negative outlook.

Positives

• The company has a merger agreement in place with Vyome Therapeutics, which is expected to close in the second quarter of 2025.
• The company has an asset purchase agreement in place with Ninjour Health International Limited, which is expected to close in the second quarter of 2025.
• The company has an equity purchase agreement with Ascent Partners Fund LLC, where Ascent has agreed to purchase up to $5,000,000 of common stock over a 36-month period.
• The company has a cost reduction plan in place, which is expected to result in a reduction of operating expenses by approximately 41% for the first nine months of 2024, compared to last year, excluding one-time costs.

Negatives

• The offering is on a best-efforts basis with no minimum amount required to close.
• The company does not expect to receive any cash proceeds from the exercise of the warrants due to an alternative cashless exercise option.
• The warrants are not exercisable unless and until Warrant Stockholder Approval is obtained from our stockholders.
• The company has a limited operating history and has not taken a product through to commercialization.
• The company has incurred losses since inception, and we expect to incur significant losses for the foreseeable future and may not be able to achieve or sustain profitability in the future.
• The company has identified material weaknesses in its internal control over financial reporting and any failure to maintain effective internal control over financial reporting, may have a material and adverse effect on its business, operating results, financial condition and prospects.
• The company faces external competition from other technologies such as GLP-1s, and alternative medical procedures and we may not be able to compete effectively.

Risks

• Management will have broad discretion as to the use of the net proceeds from this offering, and we may not use these proceeds effectively.
• This is a best efforts offering, and no minimum number or dollar amount of securities is required to be sold, and we may not raise the maximum amount we are offering.
• You will experience immediate dilution in the net tangible book value per share of the Common Stock you purchase, and may experience additional dilution in the future.
• There is no public market for the Warrants or Pre-funded Warrants being offered by us in this offering.
• If the Warrants are exercised by way of an alternative cashless exercise, especially after the reset date stockholders may suffer substantial dilution.
• The Warrants are not exercisable unless and until Warrant Stockholder Approval is obtained from our stockholders. Further, even if we obtain Warrant Stockholder Approval, the Warrants may only be exercisable for a limited period of time.
• If we are unable to either substantially improve our operating results or obtain additional financing, we may be unable to continue as a going concern.
• We have recently undertaken a cost reduction plan and reorganization, and may do so again in the future. The assumptions underlying these activities may prove to be inaccurate, or we may fail to achieve the expected benefits therefrom.
• We may be unable to attract and retain management and other personnel we need to succeed.
• We cannot assure you that we will ever generate substantial revenue or be profitable.
• Previously, we recorded a non-cash indefinite-lived intangible and definite-lived assets impairment loss, which significantly impacted our results of operations, and we may be exposed to additional impairment losses that could be material.
• The sale of issuance of our common stock to Ascent under our proposed equity line of credit transaction may cause dilution and the sale of the shares of common stock acquired by Ascent, or the perception that such sales may occur, could cause the price of our common stock to fall.
• Ascent will pay less than the then-prevailing market price for our common stock, which could cause the price of our common stock to decline.
• The Note is fully secured by collateral of ReShape and our subsidiaries and Ascent, as our senior secured lender, may exercise its right in the event of default.
• It is not possible to predict the actual number of shares we will sell under the Equity Purchase Agreement to Ascent or the actual gross proceeds resulting from those sales.
• Our commitment to issue shares of our common stock pursuant to the terms of the Equity Purchase Agreement could encourage short sales by third parties, which could contribute to the future decline of our stock price.
• Fluctuations in the market price of our common stock will affect the value of the Merger Consideration.
• The Exchange Ratio in the Merger Agreement is subject to adjustment based on ReShapes net cash as of a determination date prior to completion of the Merger, which could dilute further the ownership of either the ReShape or Vyome stockholders in the combined company.
• The ownership percentages of the ReShape and Vyome stockholders, respectively, that will result from the Exchange Ratio in the Merger Agreement are calculated prior to the completion of the Concurrent Financing, which could dilute further the ownership of the ReShape stockholders in the combined company.
• The Merger may not be consummated unless important conditions are satisfied or waived and there can be no assurance that the Merger will be consummated.
• Although an application has been filed to list the ReShape Shares on The Nasdaq Capital Market, there can be no assurance that the common stock will be so listed or, if listed, that the Combined Company will be able to comply with the continued listing standards.
• Combining the two companies may be more difficult, costly or time consuming than expected, and the Combined Company may not realize all of the anticipated benefits of the Merger.
• ReShape and Vyome will incur substantial direct and indirect costs as a result of the Merger and the Combined Company will incur substantial direct and indirect costs following the Merger.
• Both ReShape and Vyome have operated with a loss and negative cash flows for the entirety of their existence and it is expected the Combined Company will have to raise significant capital in the future that could be dilutive to stockholders of the Combined Company.
• If the perceived benefits of the Merger do not meet the expectations of investors or securities analysts, the market price of ReShapes securities or, following the Merger, Vyome Holdings, Inc. securities, may decline.
• Our efforts to increase revenue from our Lap-Band System, Lap-Band 2.0 System, and commercialize our DBSN device and expanded line of bariatric surgical accessories, including ReShape Calibration Tubes, may not succeed or may encounter delays which could significantly harm our ability to generate revenue.
• We may not be able to obtain required regulatory approvals for our DBSN device in a cost-effective manner or at all, which could adversely affect our business and operating results.
• We depend on clinical investigators and clinical sites to enroll patients in our clinical trials, and on other third parties to manage the trials and to perform related data collection and analysis, and, as a result, we may face costs and delays that are outside of our control.
• If we are unable to obtain or maintain intellectual property rights relating to our technology and neuroblocking therapy, the commercial value of our technology and any future products will be adversely affected and our competitive position will be harmed.
• We may lose important patents or patent rights if we do not timely pay required patent fees or annuities.
• Many of our competitors have significant resources and incentives to apply for and obtain intellectual property rights that could limit or prevent our ability to commercialize our current or future products in the United States or abroad.
• The trading price of our common stock has been volatile and is likely to be volatile in the future.
• Sales of a substantial number of shares of our common stock in the public market by existing stockholders, or the perception that they may occur, could cause our stock price to decline.
• We have a significant number of outstanding warrants, which may cause significant dilution to our stockholders, have a material adverse impact on the market price of our common stock and make it more difficult for us to raise funds through future equity offerings.
• While the ReShape Asset Sale is pending, it creates unknown impacts on ReShapes future which could materially and adversely affect its business, financial condition and results of operations.
• The failure to consummate the ReShape Asset Sale may materially and adversely affect ReShapes business, financial condition and results of operations.
• The Merger may be consummated despite the ReShape Asset Sale not closing under certain circumstances.
• The completion of the Asset Sale is contingent upon completion of the Merger.

Future Outlook

The combined company following the merger intends to focus on Vyome's business of advancing the development of its immuno-inflammatory assets and on identifying additional opportunities between the world-class Indian innovation corridor and the U.S. market.

Management Comments

• Under this new leadership, our company has pivoted its business strategy with the intent of helping to ensure growth and profitability.
• This first growth pillar remains, in our companys opinion, paramount for ReShape to deliver shareholder value and, ultimately, profitability.

Industry Context

The announcement highlights the ongoing trend of mergers and acquisitions in the pharmaceutical and biotechnology industries, as companies seek to expand their product portfolios and access new markets. The focus on the US-India innovation corridor reflects the increasing importance of emerging markets in the global healthcare landscape.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards.
• However, it mentions competitors such as Allergan, Boston Scientific, LivaNova PLC, Johnson & Johnson, Medtronic, and St. Jude Medical, which are established players in the medical device industry.
• The document also mentions GLP-1 receptor agonists like Wegovy, Ozempic, and Zepbound, which are pharmaceutical treatments for weight loss.
• The document does not provide specific details on how ReShape's results compare to these companies or products.

Stakeholder Impact

• Shareholders may experience dilution due to the offering and potential future equity issuances.
• Employees may be affected by the cost reduction plan and reorganization.
• Customers may benefit from the company's focus on developing innovative products and services.
• Suppliers and creditors may be impacted by the company's financial condition and ability to meet its obligations.

Next Steps

• The company will seek stockholder approval for the warrant exercise.
• The company will work towards closing the merger with Vyome Therapeutics and the asset sale to Ninjour Health International in the second quarter of 2025.
• The company will continue to implement its growth strategies and manage its cost structure.

Key Dates

Keywords

capital raise, merger, asset sale, warrants, units, offering, RSLS, ReShape Lifesciences, Vyome Therapeutics, Ninjour Health International, Ascent Partners Fund, Maxim Group LLC