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Fair Value Measurements | 9 Months Ended | 12 Months Ended
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Sep. 30, 2024 | Dec. 31, 2023
Fair Value Disclosures [Abstract] |  |
Fair Value Measurements |
10. | Fair Value Measurements
The following tables present the fair value hierarchy for the Company’s assets and liabilities that are measured at fair value at issuance date and on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):
Fair Value Measurement as of September 30, 2024 |
|  | Total Carrying Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 23,749 |  |  | $ | 23,749 |  |  | $ | — |  |  | $ | — |
Total assets |  | $ | 23,749 |  |  | $ | 23,749 |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Legacy Allurion Common Stock Warrant Liabilities |  | $ | 71 |  |  | $ | — |  |  | $ | — |  |  | $ | 71 |
Public Warrants |  |  | 531 |  |  |  | 531 |  |  |  | — |  |  |  | — |
Public Offering Warrants |  |  | 5,970 |  |  |  | — |  |  |  | — |  |  |  | 5,970 |
Private Placement Warrants |  |  | 810 |  |  |  | — |  |  |  | — |  |  |  | 810 |
Revenue Interest Financing |  |  | 38,500 |  |  |  | — |  |  |  | — |  |  |  | 38,500 |
PIPE Conversion Option |  |  | 9,850 |  |  |  | — |  |  |  | — |  |  |  | 9,850 |
Earn-out Liability |  |  | 1,850 |  |  |  | — |  |  |  | — |  |  |  | 1,850 |
RTW Convertible Notes |  |  | 36,090 |  |  |  | — |  |  |  | — |  |  |  | 36,090 |
Success Fee Derivative Liability |  |  | 14 |  |  |  | — |  |  |  | — |  |  |  | 14 |
Total Liabilities |  | $ | 93,686 |  |  | $ | 531 |  |  | $ | — |  |  | $ | 93,155 |
Fair Value Measurement as of December 31, 2023 |
|  | Total Carrying Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 30,582 |  |  | $ | 30,582 |  |  | $ | — |  |  | $ | — |
Total assets |  | $ | 30,582 |  |  | $ | 30,582 |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Legacy Allurion Common Stock Warrant Liabilities |  | $ | 821 |  |  | $ | — |  |  | $ | — |  |  | $ | 821 |
Public Warrants |  |  | 5,943 |  |  |  | 5,943 |  |  |  | — |  |  |  | — |
Revenue Interest Financing |  |  | 36,200 |  |  |  | — |  |  |  | — |  |  |  | 36,200 |
PIPE Conversion Option |  |  | 5,600 |  |  |  | — |  |  |  | — |  |  |  | 5,600 |
Earn-out Liability |  |  | 23,990 |  |  |  | — |  |  |  | — |  |  |  | 23,990 |
Term Loan Derivative Liability |  |  | 1,895 |  |  |  | — |  |  |  | — |  |  |  | 1,895 |
Success Fee Derivative Liability |  |  | 14 |  |  |  | — |  |  |  | — |  |  |  | 14 |
Total Liabilities |  | $ | 74,463 |  |  | $ | 5,943 |  |  | $ | — |  |  | $ | 68,520 |
Public Warrants As a result of the Business Combination on August 1, 2023, the Company recorded a liability for Public Warrants to purchase the Company’s Common Stock. The Public Warrants are traded on the NYSE and are recorded at fair value using the closing price as September 30, 2024 of $0.04, which is a Level 1 input. Legacy Allurion Warrants, Public Offering Warrants, and Private Placement Warrants The Company has classified the Legacy Allurion Common Stock Warrants, Public Offering Warrants (defined below), and Private Placement Warrants (defined below) within Level 3 of the hierarchy as the fair value is derived using the Black-Scholes option pricing model, which uses a combination of observable (Level 2) and unobservable (Level 3) inputs. See table below for the assumptions used in the pricing model of the Legacy Allurion Common Stock Warrants, Public Offering Warrants, and Private Placement Warrants:
|  | Measurement Date |  |  | Interest Rate |  |  | Exercise Price |  |  | Estimated Fair Value of Underlying Share Price |  |  | Expected Volatility |  |  | Expected Life (Years) |
Legacy Allurion Series C Preferred Stock warrants (as converted to Common) |  |  | September 30, 2024 |  |  |  | 3.65% |  |  | $ | 6.73 |  |  | $ | 0.61 |  |  |  | 90 | % |  |  | 6.50 |
Legacy Allurion Other Common Stock |  |  | September 30, 2024 |  |  |  | 3.59% |  |  |  | 1.05 |  |  |  | 0.61 |  |  |  | 90 | % |  |  | 2.94 |
Legacy Allurion Series D-1 Preferred Stock warrants (as converted to Common) |  |  | September 30, 2024 |  |  |  | 3.65% - 3.71% |  |  |  | 12.14 |  |  |  | 0.61 |  |  |  | 90 | % |  |  | 6.5 - 7.96 |
Public Offering Warrants |  |  | September 30, 2024 |  |  |  | 3.58% |  |  |  | 1.20 |  |  |  | 0.61 |  |  |  | 90 | % |  |  | 4.75 |
Private Placement Warrants |  |  | September 30, 2024 |  |  |  | 3.58% |  |  |  | 1.20 |  |  |  | 0.61 |  |  |  | 90 | % |  |  | 4.75 |
|  | Measurement Date |  |  | Interest Rate |  |  | Exercise Price |  |  | Estimated Fair Value of Underlying Share Price |  |  | Expected Volatility |  |  | Expected Life (Years) |
Legacy Allurion Series C Preferred Stock warrants (as converted to Common) |  |  | December 31, 2023 |  |  |  | 3.88 | % |  |  | 6.73 |  |  | $ | 3.74 |  |  |  | 100 | % |  |  | 7.25 |
Legacy Allurion Other Common Stock |  |  | December 31, 2023 |  |  |  | 3.95 | % |  |  | 1.05 |  |  |  | 3.74 |  |  |  | 100 | % |  |  | 3.69 |
Legacy Allurion Series D-1 Preferred Stock warrants (as converted to Common) |  |  | December 31, 2023 |  |  |  | 3.88 | % |  |  | 12.14 |  |  |  | 3.74 |  |  |  | 100 | % |  |  | 7.25 - 8.71 |
Expected dividend yield for all calculations is 0.00%. The following table reconciles the changes in fair value for the three and nine months ended September 30, 2024 and 2023 of the warrant liabilities valued using Level 3 inputs:
|  | Preferred Stock Warrants (as converted to Common) |  |  | Common Stock Warrants |  |  | Public Offering Warrants |  |  | Private Placement Warrants |  |  | Total |
Balance – June 30, 2023 |  | $ | 2,679 |  |  | $ | 1,351 |  |  |  | — |  |  |  | — |  |  | $ | 4,030 |
Change in fair value |  |  | (1,571 | ) |  |  | (555 | ) |  |  | — |  |  |  | — |  |  |  | (2,126 | )
Exercise of warrants |  |  | (53 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (53 | )
Derecognition of liability to equity |  |  | (340 | ) |  |  | (589 | ) |  |  | — |  |  |  | — |  |  |  | (929 | )
Balance – September 30, 2023 |  | $ | 715 |  |  | $ | 207 |  |  | $ | — |  |  | $ | — |  |  | $ | 922 |
Balance – June 30, 2024 |  | $ | 110 |  |  | $ | 35 |  |  |  | — |  |  |  | — |  |  | $ | 145 |
Fair value at issuance |  |  | — |  |  |  | — |  |  |  | 13,157 |  |  |  | 1,670 |  |  |  | 14,827 |
Change in fair value |  |  | (55 | ) |  |  | (19 | ) |  |  | (7,187 | ) |  |  | (860 | ) |  |  | (8,121 | )
Balance – September 30, 2024 |  | $ | 55 |  |  | $ | 16 |  |  | $ | 5,970 |  |  | $ | 810 |  |  | $ | 6,851 |
|  | Preferred Stock Warrants (as converted to Common) |  |  |  |  |  | Common Stock Warrants |  |  | Public Offering Warrants |  |  |  |  |  | Private Placement Warrants |  |  | Total |
Balance – January 1, 2023 |  | $ | 1,777 |  |  |  |  |  |  | $ | 596 |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | 2,373 |
Change in fair value |  |  | (647 | ) |  |  |  |  |  |  | 200 |  |  |  | — |  |  |  |  |  |  |  | — |  |  |  | (447 | )
Exercise of warrants |  |  | (75 | ) |  |  |  |  |  |  | — |  |  |  | — |  |  |  |  |  |  |  | — |  |  |  | (75 | )
Derecognition of liability to equity |  |  | (340 | ) |  |  |  |  |  |  | (589 | ) |  |  | — |  |  |  |  |  |  |  | — |  |  |  | (929 | )
Balance – September 30, 2023 |  | $ | 715 |  |  |  |  |  |  | $ | 207 |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | 922 |
Balance – January 1, 2024 |  | $ | 642 |  |  |  |  |  |  | $ | 179 |  |  | $ | — |  |  |  |  |  |  | $ | — |  |  | $ | 821 |
Fair value at issuance |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 13,157 |  |  |  |  |  |  |  | 1,670 |  |  |  | 14,827 |
Change in fair value |  |  | (587 | ) |  |  |  |  |  |  | (163 | ) |  |  | (7,187 | ) |  |  |  |  |  |  | (860 | ) |  |  | (8,797 | )
Balance – September 30, 2024 |  | $ | 55 |  |  |  |  |  |  | $ | 16 |  |  | $ | 5,970 |  |  | $ | — |  |  | $ | 810 |  |  | $ | 6,851 |
2019 Term Loan Success Fee Derivative Liability The derivative liability for the success fee associated with Legacy Allurion’s November 2019 loan and security agreement with Western Alliance Bank (the “2019 Term Loan” and such fee, the “Success Fee”) was recorded at fair value as of September 30, 2024 and December 31, 2023 using the following assumptions: weighted-average probability for the likelihood of a change in control or liquidity event within four years from the initial valuation date of the derivative liability and a market-based discount rate that will increase or decrease each period based on changes in the probability in the future cash flows. 2023 Convertible Notes The 2023 Convertible Notes were accounted for using the FVO election. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently re-measured at estimated fair value on a recurring basis at each reporting period date. The fair value was measured as of August 1, 2023, just prior to the conversion of the 2023 Convertible Notes, using the share price at conversion ($7.04 per share). Upon the conversion of the 2023 Convertible Notes, the convertible note liability was derecognized. Revenue Interest Financing and PIPE Conversion Option The Revenue Interest Financing is accounted for using the FVO election. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The fair value of the Revenue Interest Financing was remeasured as of September 30, 2024 and December 31, 2023 using a discounted cash flow (“DCF”) method under the income approach utilizing future revenue projections and a discount rate of 23.5% and 24.4%, respectively. The fair value of the PIPE Conversion Option was accounted for as a derivative under ASC 815. The instrument is measured using a Monte Carlo Simulation Method (“MCSM”) using the number of shares convertible of 1,065,341 and the following assumptions:
|  | September 30, 2024 |  |  | December 31, 2023 |
Stock Price |  | $ | 0.61 |  |  | $ | 3.74 |
Risk-free interest rate |  |  | 4.03 | % |  |  | 4.46 | %
Expected term (in years) |  |  | 0.8 |  |  |  | 1.6 |
Expected volatility |  |  | 130.0 | % |  |  | 82.5 | %
Earn-Out Liability Upon the closing of the Business Combination, the Earn-Out Shares were accounted for as a liability because the triggering events that determine the number of shares to be earned included events that were not indexed to Allurion Common Stock, with the change in fair value recognized in Change in the fair value of earn-out liabilities in the consolidated statement of operations. The estimated fair value of the Earn-Out Shares was determined using a MCSM with the following assumptions at each valuation date:
|  | September 30, 2024 |  |  | December 31, 2023 |
Stock Price |  | $ | 0.61 |  |  | $ | 3.74 |
Risk-free interest rate |  |  | 3.6 | % |  |  | 3.9 | %
Expected term (in years) |  |  | 3.8 |  |  |  | 4.6 |
Expected volatility |  |  | 105.0 | % |  |  | 87.0 | %
Term Loan Derivative Liability The Term Loan derivative liability associated with the Fortress Term Loan was derecognized during the second quarter of 2024 as the Fortress Term Loan was repaid on April 16, 2024. RTW Convertible Notes The RTW Convertible Notes are accounted for using the FVO election. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently measured at estimated fair value on a recurring basis at each reporting period date. The fair value of the RTW Convertible Notes was remeasured as of September 30, 2024 using a DCF method under the income approach with a MCSM applied to determine the simulated stock price at each payment date and event that may trigger conversion of the RTW Convertible Notes. The fair value was measured using the $48.0 million principal amount of the RTW Convertible Notes and the following assumptions:
|  | September 30, 2024 |
Stock Price |  | $ | 0.61 |
Risk-free interest rate |  |  | 3.6 | %
Expected term (in years) |  |  | 6.5 |
Expected volatility |  |  | 90.0 | %
The changes in the fair values of the Success Fee derivative liability, 2023 Convertible Notes, Revenue Interest Financing, PIPE Conversion Option, Earn-out liability, Term Loan Derivative liability, RTW Convertible Notes, PubCo Share liability, Base PubCo and Backstop Share liability, and Warrant Overallotment Liability categorized with Level 3 inputs for the three and nine months ended September 30, 2024 and 2023 were as follows:
|  | Success Fee Derivative Liability |  |  | 2023 Convertible Notes |  |  | Revenue Interest Financing |  |  | PIPE Conversion Derivative |  |  | Earn-Out Liability |  |  | Term Loan Derivative Liability |  |  | RTW Convertible Notes |  |  | PubCo Share Liability |  |  | Base PubCo & Backstop Share Liability |  |  | Total |
Balance – June 30, 2023 |  | $ | 213 |  |  | $ | 16,793 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,327 |  |  | $ | 3,305 |  |  | $ | 23,638 |
Fair value upon issuance |  |  | — |  |  |  | 9,150 |  |  | $ | 40,000 |  |  |  | 3,340 |  |  |  | 53,040 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  | $ | 105,530 |
Change in fair value |  |  | (201 | ) |  |  | 6,008 |  |  |  | (3,400 | ) |  |  | 2,100 |  |  |  | (24,330 | ) |  |  | — |  |  |  | — |  |  |  | (599 | ) |  |  | 10,065 |  |  | $ | (10,357 | )
Repayments of debt |  |  | — |  |  |  | (10,250 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  | $ | (10,250 | )
Derecognition of liability to equity |  |  | — |  |  |  | (21,701 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,728 | ) |  |  | (13,370 | ) |  | $ | (37,799 | )
Balance – September 30, 2023 |  | $ | 12 |  |  | $ | — |  |  | $ | 36,600 |  |  | $ | 5,440 |  |  | $ | 28,710 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 70,762 |
Balance – June 30, 2024 |  | $ | 14 |  |  | $ | — |  |  | $ | 39,000 |  |  | $ | 5,450 |  |  | $ | 4,110 |  |  | $ | — |  |  | $ | 40,950 |  |  | $ | — |  |  | $ | — |  |  | $ | 89,524 |
Change in fair value |  |  | — |  |  |  | — |  |  |  | 6,704 |  |  |  | 4,400 |  |  |  | (2,260 | ) |  |  | — |  |  |  | (1,790 | ) |  |  | — |  |  |  | — |  |  |  | 7,054 |
Change in fair value – OCI |  |  | — |  |  |  | — |  |  |  | (5,800 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3,070 | ) |  |  | — |  |  |  | — |  |  |  | (8,870 | )
Repayments of debt |  |  | — |  |  |  | — |  |  |  | (1,404 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,404 | )
Balance – September 30, 2024 |  | $ | 14 |  |  | $ | — |  |  | $ | 38,500 |  |  | $ | 9,850 |  |  | $ | 1,850 |  |  | $ | — |  |  | $ | 36,090 |  |  | $ | — |  |  | $ | — |  |  | $ | 86,304 |
Balance – January 1, 2023 |  | $ | 178 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 178 |
Fair value upon issuance |  |  | — |  |  |  | 28,700 |  |  | $ | 40,000 |  |  |  | 3,340 |  |  |  | 53,040 |  |  |  | — |  |  |  | — |  |  |  | 3,370 |  |  |  | 3,264 |  |  |  | 131,714 |
Change in fair value |  |  | (166 | ) |  |  | 3,751 |  |  |  | (3,400 | ) |  |  | 2,100 |  |  |  | (24,330 | ) |  |  | — |  |  |  | — |  |  |  | (642 | ) |  |  | 10,106 |  |  |  | (12,581 | )
Repayments of debt |  |  | — |  |  |  | (10,750 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (10,750 | )
Derecognition of liability to equity |  |  | — |  |  |  | (21,701 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,728 | ) |  |  | (13,370 | ) |  |  | (37,799 | )
Balance – September 30, 2023 |  | $ | 12 |  |  | $ | — |  |  | $ | 36,600 |  |  | $ | 5,440 |  |  | $ | 28,710 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 70,762 |
|  | Success Fee Derivative Liability |  |  | 2023 Convertible Notes |  |  | Revenue Interest Financing |  |  | PIPE Conversion Derivative |  |  | Earn-Out Liability |  |  | Term Loan Derivative Liability |  |  | RTW Convertible Notes |  |  | PubCo Share Liability |  |  | Base PubCo & Backstop Share Liability |  |  | Total |
Balance – January 1, 2024 |  | $ | 14 |  |  | $ | — |  |  | $ | 36,200 |  |  | $ | 5,600 |  |  | $ | 23,990 |  |  | $ | 1,895 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 67,699 |
Fair value upon issuance |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 49,100 |  |  |  | — |  |  |  | — |  |  |  | 49,100 |
Change in fair value |  |  | — |  |  |  | — |  |  |  | 5,358 |  |  |  | 4,250 |  |  |  | (22,140 | ) |  |  | (1,895 | ) |  |  | (10,020 | ) |  |  | — |  |  |  | — |  |  |  | (24,447 | )
Change in fair value – OCI |  |  | — |  |  |  | — |  |  |  | (600 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,990 | ) |  |  | — |  |  |  | — |  |  |  | (3,590 | )
Repayments of debt |  |  | — |  |  |  | — |  |  |  | (2,458 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,458 | )
Balance – September 30, 2024 |  | $ | 14 |  |  | $ | — |  |  | $ | 38,500 |  |  | $ | 9,850 |  |  | $ | 1,850 |  |  | $ | — |  |  | $ | 36,090 |  |  | $ | — |  |  | $ | — |  |  | $ | 86,304 |
The change in fair value of the Success Fee derivative liability, 2023 Convertible Notes, Revenue Interest Financing, PIPE Conversion Option, Earn-Out liability, Term Loan Derivative liability, RTW Convertible Not es, Pubco Share liability, and Base PubCo and Backstop Share liability at each period is recorded as a component of Other income (expense) in the condensed consolidated statements of operations, with the exception of the changes in fair value associated with the change in credit risk related to the Revenue Interest Financing and RTW Convertible Notes, which is recorded as a component of other comprehensive loss. |
10. | Fair Value Measurements
The following tables present the fair value hierarchy for assets and liabilities that are measured at fair value at issuance date and on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):
Fair Value Measurement as of December 31, 2023 |
|  | Total Carrying Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 30,582 |  |  | $ | 30,582 |  |  | $ | — |  |  | $ | — |
Total assets |  | $ | 30,582 |  |  | $ | 30,582 |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Legacy Allurion Common Stock Warrant Liabilities |  | $ | 821 |  |  | $ | — |  |  | $ | — |  |  | $ | 821 |
Public Warrants |  |  | 5,943 |  |  |  | 5,943 |  |  |  | — |  |  |  | — |
Revenue Interest Financing |  |  | 36,200 |  |  |  | — |  |  |  | — |  |  |  | 36,200 |
PIPE Conversion Option |  |  | 5,600 |  |  |  | — |  |  |  | — |  |  |  | 5,600 |
Earn-out Liability |  |  | 23,990 |  |  |  | — |  |  |  | — |  |  |  | 23,990 |
Term Loan Derivative Liability |  |  | 1,895 |  |  |  | — |  |  |  | — |  |  |  | 1,895 |
Success Fee Derivative Liability |  |  | 14 |  |  |  | — |  |  |  | — |  |  |  | 14 |
Total Liabilities |  | $ | 74,463 |  |  | $ | 5,943 |  |  | $ | — |  |  | $ | 68,520 |
Fair Value Measurement as of December 31, 2022 |
|  | Total Carrying Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 4,925 |  |  | $ | 4,925 |  |  | $ | — |  |  | $ | — |
Total assets |  | $ | 4,925 |  |  | $ | 4,925 |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Legacy Allurion Series C Common Stock Warrant Liability |  | $ | 340 |  |  | $ | — |  |  | $ | — |  |  | $ | 340 |
Legacy Allurion Series B Preferred Stock Warrant Liability |  |  | 303 |  |  |  | — |  |  |  | — |  |  |  | 303 |
Legacy Allurion Series A-1 Preferred Stock Warrant Liability |  |  | 82 |  |  |  | — |  |  |  | — |  |  |  | 82 |
Other Common Stock Warrant Liabilities |  |  | 255 |  |  |  | — |  |  |  | — |  |  |  | 255 |
Legacy Allurion Series C Preferred Stock Warrant Liability |  |  | 684 |  |  |  | — |  |  |  | — |  |  |  | 684 |
Derivative Liability-Success Fee |  |  | 180 |  |  |  | — |  |  |  | — |  |  |  | 180 |
Legacy Allurion Series D-1 Preferred Stock Warrant Liability |  |  | 707 |  |  |  | — |  |  |  | — |  |  |  | 707 |
Total Liabilities |  | $ | 2,551 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,551 |
Public Warrants As a result of the Business Combination on August 1, 2023, the Company recorded a liability for Public Warrants to purchase the Company’s Common Stock. The Public Warrants are traded on the NYSE and are recorded at fair value using the closing price as of December 31, 2023 of $0.45, which is a Level 1 input. Legacy Allurion Warrants The Company has classified the warrants within Level 3 of the hierarchy as the fair value is derived using the Black-Scholes option pricing model, which uses a combination of observable (Level 2) and unobservable (level 3) inputs. See table below for the assumptions used in the pricing model:
|  | Measurement Date |  |  | Interest Rate |  |  | Exercise Price |  |  | Estimated Fair Value of Underlying Share Price |  |  | Expected Volatility |  |  | Expected Life (Years) |
Legacy Allurion Series C Preferred Stock warrants (as converted to Common) |  |  | December 31, 2023 |  |  |  | 3.88 | % |  |  | 6.73 |  |  |  | 3.74 |  |  |  | 100 | % |  |  | 7.25 |
Other Common Stock |  |  | December 31, 2023 |  |  |  | 3.95 | % |  |  | 1.05 |  |  |  | 3.74 |  |  |  | 100 | % |  |  | 3.69 |
Legacy Allurion Series D-1 Preferred Stock warrants (as converted to Common) |  |  | December 31, 2023 |  |  |  | 3.88 | % |  |  | 12.14 |  |  |  | 3.74 |  |  |  | 100 | % |  |  | 7.25 - 8.71 |
Legacy Allurion Series A-1 Preferred Stock warrants (as converted to Rollover warrants) |  |  | December 31, 2022 |  |  |  | 4.42 | % |  | $ | 1.90 |  |  | $ | 6.75 |  |  |  | 69 | % |  |  | 0.25 |
Legacy Allurion Series B Preferred Stock warrants (as converted to Rollover warrants) |  |  | December 31, 2022 |  |  |  | 4.41 | % |  |  | 2.38 |  |  |  | 6.91 |  |  |  | 65 | % |  |  | 2.00 |
Legacy Allurion Series C Common Stock warrants (as converted to Rollover warrants) |  |  | December 31, 2022 |  |  |  | 4.11 | % |  |  | 0.01 |  |  |  | 4.54 |  |  |  | 63 | % |  |  | 4.00 |
Legacy Allurion Series C Preferred Stock warrants (as converted to Rollover warrants) |  |  | December 31, 2022 |  |  |  | 3.92 | % |  |  | 6.58 |  |  |  | 7.24 |  |  |  | 63 | % |  |  | 8.20 |
Other Common Stock Warrants |  |  | December 31, 2022 |  |  |  | 3.99 | % |  |  | 1.02 - 1.10 |  |  |  | 4.54 |  |  |  | 63 | % |  |  | 4.6 - 4.7 |
Legacy Allurion Series D-1 Preferred Stock warrants (as converted to Rollover warrants) |  |  | December 31, 2022 |  |  |  | 3.88 - 3.92 | % |  |  | 11.87 |  |  |  | 11.31 |  |  |  | 63 | % |  |  | 8.2 - 9.7 |
Expected dividend yield for all calculations is 0.00%. The following table reconciles the changes in fair value for the years ended December 31, 2023 and 2022 of the warrant liabilities valued using Level 3 inputs:
|  | Preferred Stock Warrants (as converted to Common) |  |  | Common Stock Warrants |  |  | Total |
Balance – January 1, 2022 |  | $ | 510 |  |  | $ | 231 |  |  | $ | 741 |
Fair value upon issuance |  |  | 834 |  |  |  | — |  |  |  | 834 |
Change in fair value |  |  | 456 |  |  |  | 365 |  |  |  | 821 |
Exercise of warrants |  |  | (23 | ) |  |  | — |  |  |  | (23 | )
Balance – December 31, 2022 |  | $ | 1,777 |  |  | $ | 596 |  |  | $ | 2,373 |
Change in fair value |  |  | (720 | ) |  |  | 172 |  |  |  | (548 | )
Exercise of warrants |  |  | (75 | ) |  |  | — |  |  |  | (75 | )
Derecognition of liability to equity |  |  | (340 | ) |  |  | (589 | ) |  |  | (929 | )
Balance – December 31, 2023 |  | $ | 642 |  |  | $ | 179 |  |  | $ | 821 |
2019 Term Loan Success Fee Derivative Liability The derivative liability for the success fee associated with Legacy Allurion’s November 2019 loan and security agreement with Western Alliance Bank (the “2019 Term Loan” and such fee, the “Success Fee”) was recorded at fair value as of December 31, 2023 using the following assumptions: weighted-average probability for the likelihood of a change in control or liquidity event within four years from the initial valuation date of the derivative liability and a market-based discount rate that will increase or decrease each period based on changes in the probability in the future cash flows. 2023 Convertible Notes The 2023 Convertible Notes were accounted for using the FVO election. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently re-measured at estimated fair value on a recurring basis at each reporting period date. The fair value was measured as of August 1, 2023, just prior to the conversion of the notes, using the share price at conversion ($7.04 per share). Upon the conversion of the notes, the convertible note liability was derecognized. PubCo Additional Shares Liability The PubCo Additional Shares liability was initially recorded at fair value as of May 2, 2023 and revalued as of August 1, 2023, just prior to the close of the Business Combination, using the number of shares issued at the close of the Business Combination of 387,696 and an estimated price of shares at settlement of $7.04. Upon the issuance of shares, the PubCo Additional Shares liability was derecognized. Base PubCo Shares and Backstop Shares Liability The Base PubCo Shares and Backstop Shares liability was initially recorded at fair value as of May 2, 2023 and revalued as of August 1, 2023, just prior to the close of the Business Combination, using the number of shares for each Backstop Purchaser at the close of the Business Combination of 950,000 and an estimated price of shares at settlement of $7.04. Upon the issuance of shares, the Base PubCo Shares and Backstop Shares liability was derecognized. Revenue Interest Financing and PIPE Conversion Option The Revenue Interest Financing was accounted for using the FVO election. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The fair value of the Revenue Interest Financing was remeasured as of December 31, 2023 using a discounted cash flow (“DCF”) method under the income approach utilizing future revenue projections and a discount rate of 24.4%. The fair value of the PIPE Conversion Option was accounted for as a derivative under ASC 815. The instrument is measured using a Monte Carlo Simulation Method using the number of shares convertible of 1,065,341 and the following assumptions:
|  | December 31, 2023 |
Stock Price |  |  | 3.74 |
Risk-free interest rate |  |  | 4.46 | %
Expected term (in years) |  |  | 1.6 |
Expected volatility |  |  | 82.5 | %
Earn-Out Liability Upon the closing of the Business Combination, the Earn-Out Shares were accounted for as a liability because the triggering events that determine the number of shares to be earned included events that were not indexed to Allurion Common Stock, with the change in fair value recognized in Change in the fair value of earn-out liabilities in the consolidated statement of operations. The estimated fair value of the earn-out shares was determined using a Monte Carlo Simulation Method using the following assumptions at the valuation date:
|  | December 31, 2023 |
Stock Price |  |  | 3.74 |
Risk-free interest rate |  |  | 3.9 | %
Expected term (in years) |  |  | 4.6 |
Expected volatility |  |  | 87.0 | %
Term Loan Derivative Liability The Term Loan Derivative Liability associated with the Fortress Term Loan was recorded at fair value as of December 31, 2023 using a DCF model that includes default interest payments expected to be made based on future revenue projections and cash flow assumptions and a discount rate of 24.4%. The changes in the fair values of the Success Fee derivative liability, 2023 Convertible Notes, PubCo Additional Shares liability, Base PubCo Shares and Backstop Shares liability, Revenue Interest Financing, PIPE Conversion Option, Earn-out liability, and Term Loan Derivative Liability categorized with Level 3 inputs for the years ended December 31, 2023 and 2022 were as follows:
|  | Success Fee Derivative Liability |  |  | 2023 Convertible Notes |  |  | PubCo Share Liability |  |  | Base PubCo & Backstop Share Liability |  |  | Revenue Interest Financing |  |  | PIPE Conversion Derivative |  |  | Earn-Out Liability |  |  | Term Loan Derivative Liability |  |  | Total |
Balance – January 1, 2022 |  | $ | 159 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 159 |
Fair value upon issuance |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Change in fair value |  |  | 19 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 19 |
Exercise of warrants |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance – December 31, 2022 |  | $ | 178 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 178 |
Fair value upon issuance |  |  | — |  |  | $ | 28,700 |  |  |  | 3,370 |  |  |  | 3,264 |  |  |  | 40,000 |  |  |  | 3,340 |  |  |  | 53,040 |  |  |  | 1,895 |  |  |  | 133,609 |
Change in fair value |  |  | (164 | ) |  |  | 3,751 |  |  |  | (642 | ) |  |  | 10,106 |  |  |  | (3,408 | ) |  |  | 2,260 |  |  |  | (29,050 | ) |  |  | — |  |  |  | (17,147 | )
Change in fair value – OCI |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 700 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 700 |
Payments |  |  | — |  |  |  | (10,750 | ) |  |  | — |  |  |  | — |  |  |  | (1,092 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (11,842 | )
Derecognition of liability to equity |  |  | — |  |  |  | (21,701 | ) |  |  | (2,728 | ) |  |  | (13,370 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (37,799 | )
Balance – December 31, 2023 |  | $ | 14 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 36,200 |  |  | $ | 5,600 |  |  | $ | 23,990 |  |  | $ | 1,895 |  |  | $ | 67,699 |
The change in fair value of the Success Fee derivative liability, 2023 Convertible Notes, PubCo Additional Shares liability, Base PubCo Shares and Backstop Shares liability, Revenue Interest Financing, PIPE Conversion Option, Earn-Out liability, and Term Loan Derivative Liability at each period is recorded as a component of Other (expense) income in the consolidated statements of operations, with the exception of the change in fair value associated with the change in credit risk related to the Revenue Interest Financing which is recorded as a component of other comprehensive loss. Assets and Liabilities Not Carried at Fair Value The Company’s Fortress term loan is carried at amortized cost. The fair value of the Fortress term loan was estimated to be $43.2 million on December 31, 2023. The fair value was determined using a discounted cash flow approach. We classified the fair value disclosures for the Fortress Term Loan within level 3 of the fair value hierarchy because the fair value is derived using a significant unobservable input, which includes a discount rate.

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