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Fair Value Measurements
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements

11. 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, 2024

 

 

Total
Carrying
Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

11,992

 

 

$

11,992

 

 

$

—

 

 

$

—

 

Total assets

 

$

11,992

 

 

$

11,992

 

 

$

—

 

 

$

—

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Allurion Common Stock Warrant Liabilities

 

$

41

 

 

$

—

 

 

$

—

 

 

$

41

 

Public Warrants

 

 

396

 

 

 

396

 

 

 

—

 

 

 

—

 

Public Offering Warrants

 

 

3,630

 

 

 

—

 

 

 

—

 

 

 

3,630

 

Private Placement Warrants

 

 

500

 

 

 

—

 

 

 

—

 

 

 

500

 

Revenue Interest Financing

 

 

49,200

 

 

 

—

 

 

 

—

 

 

 

49,200

 

Earn-out Liability

 

 

1,090

 

 

 

—

 

 

 

—

 

 

 

1,090

 

RTW Convertible Notes

 

 

35,710

 

 

 

—

 

 

 

—

 

 

 

35,710

 

Success Fee Derivative Liability

 

 

14

 

 

 

—

 

 

 

—

 

 

 

14

 

Total Liabilities

 

$

90,581

 

 

$

396

 

 

$

—

 

 

$

90,185

 

 

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 Liability

 

$

821

 

 

$

—

 

 

$

—

 

 

$

821

 

Public Warrants

 

 

5,943

 

 

 

5,943

 

 

 

—

 

 

 

—

 

Revenue Interest Financing

 

 

36,200

 

 

 

—

 

 

 

—

 

 

 

36,200

 

PIPE Conversion Option (Restated)

 

 

6,410

 

 

 

—

 

 

 

—

 

 

 

6,410

 

Earn-out Liability

 

 

23,990

 

 

 

—

 

 

 

—

 

 

 

23,990

 

Term Loan Derivative Liability

 

 

1,895

 

 

 

—

 

 

 

—

 

 

 

1,895

 

Success Fee Derivative Liability

 

 

14

 

 

 

—

 

 

 

—

 

 

 

14

 

Total Liabilities

 

$

75,273

 

 

$

5,943

 

 

$

—

 

 

$

69,330

 

 

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, 2024 of $0.03, 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)

 

December 31, 2024

 

4.44%

 

 

168.25

 

 

 

10.75

 

 

90%

 

 

6.25

 

Legacy Allurion Other Common Stock

 

December 31, 2024

 

4.26%

 

 

26.25

 

 

 

10.75

 

 

90%

 

 

2.69

 

Legacy Allurion Series D-1 Preferred Stock
warrants (as converted to Common)

 

December 31, 2024

 

4.44%-4.5%

 

 

303.50

 

 

 

10.75

 

 

90%

 

6.25-7.71

 

Public Offering Warrants

 

December 31, 2024

 

4.35%

 

 

30.00

 

 

 

10.75

 

 

90%

 

 

4.50

 

Private Placement Warrants

 

December 31, 2024

 

4.35%

 

 

30.00

 

 

 

10.75

 

 

90%

 

 

4.50

 

 

 

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

%

 

$

168.25

 

 

$

93.50

 

 

 

100

%

 

 

7.25

 

Legacy Allurion Other Common Stock

 

December 31, 2023

 

 

3.95

%

 

 

26.25

 

 

 

93.50

 

 

 

100

%

 

 

3.69

 

Legacy Allurion Series D-1 Preferred Stock
warrants (as converted to Common)

 

December 31, 2023

 

 

3.88

%

 

 

303.50

 

 

 

93.50

 

 

 

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 years ended December 31, 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 – January 1, 2023

 

$

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

 

Fair value at issuance

 

$

—

 

 

$

—

 

 

$

13,157

 

 

$

1,670

 

 

$

14,827

 

Change in fair value

 

 

(610

)

 

 

(170

)

 

 

(9,527

)

 

 

(1,170

)

 

 

(11,477

)

Balance – December 31, 2024

 

$

32

 

 

$

9

 

 

$

3,630

 

 

$

500

 

 

$

4,171

 

 

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, 2024 and 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 after giving effect to the Reverse Stock Split ($176.00 per share). Upon the conversion of the 2023 Convertible 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 and after giving effect to the Reverse Stock Split of 15,508 and an estimated price of shares at settlement of $176.00. 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 and after giving effect to Reverse Stock Split of 38,000 and an estimated price of shares at settlement of $176.00. 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, 2024 using a discounted cash flow ("DCF") method under the income approach utilizing future revenue projections and a discount rate of 21.1%.

The fair value of the PIPE Conversion Option was accounted for as a derivative under ASC 815. The instrument was measured using a Monte Carlo Simulation Method using the number of shares convertible of 42,614 and the below assumptions. Upon the exercise of the PIPE Conversion Option and resulting New RIFA on October 30, 2024, the PIPE Conversion Option was reclassified as an additional to the Revenue Interest Financing liability, and as such there is no PIPE Conversion Option liability as of December 31, 2024.

 

 

December 31, 2023

Stock Price

 

93.5

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 following valuation dates:

 

 

December 31, 2024

 

 

December 31, 2023

 

Stock Price

 

10.75

 

 

93.5

 

Risk-free interest rate

 

 

4.3

%

 

 

3.9

%

Expected term (in years)

 

3.6

 

 

4.6

 

Expected volatility

 

 

109.0

%

 

 

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 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 December 31, 2024 using a DCF method under the income approach with 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:

 

December 31, 2024

 

Stock Price

 

10.75

 

Risk-free interest rate

 

 

4.4

%

Expected term (in years)

 

6.3

 

Expected volatility

 

 

90.0

%

 

 

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, Term Loan Derivative Liability, and RTW Convertible Notes categorized with Level 3 inputs for the years ended December 31, 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 – January 1, 2023

 

$

178

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

178

 

Fair value upon issuance

 

 

—

 

 

 

28,700

 

 

 

40,000

 

 

 

3,340

 

 

 

53,040

 

 

 

1,895

 

 

 

—

 

 

 

3,370

 

 

 

3,264

 

 

 

133,609

 

Change in fair value (Restated) (1)

 

 

(164

)

 

 

3,751

 

 

 

(2,008

)

 

 

3,070

 

 

 

(29,050

)

 

 

—

 

 

 

—

 

 

 

(642

)

 

 

10,106

 

 

 

(14,937

)

Change in fair value - OCI (Restated) (1)

 

 

—

 

 

 

—

 

 

 

(700

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(700

)

Repayments of debt

 

 

—

 

 

 

(10,750

)

 

 

(1,092

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11,842

)

Derecognition of liability to
   equity

 

 

—

 

 

 

(21,701

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,728

)

 

 

(13,370

)

 

 

(37,799

)

Balance – December 31, 2023 (Restated)

 

$

14

 

 

$

—

 

 

$

36,200

 

 

$

6,410

 

 

$

23,990

 

 

$

1,895

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

68,509

 

Fair value upon issuance

 

 

—

 

 

$

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

49,100

 

 

 

—

 

 

 

—

 

 

 

49,100

 

Change in fair value (Restated) (1)

 

 

—

 

 

 

—

 

 

 

4,328

 

 

 

990

 

 

 

(22,900

)

 

 

(1,895

)

 

 

(18,090

)

 

 

—

 

 

 

—

 

 

 

(37,567

)

Change in fair value - OCI (Restated) (1)

 

 

—

 

 

 

—

 

 

 

4,370

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,700

 

 

 

—

 

 

 

—

 

 

 

9,070

 

Exercise of warrants

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Exercise of PIPE Conversion Option

 

 

—

 

 

 

—

 

 

 

7,400

 

 

 

(7,400

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Repayments of debt

 

 

—

 

 

 

—

 

 

 

(3,098

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,098

)

Balance – December 31, 2024

 

$

14

 

 

$

—

 

 

$

49,200

 

 

$

—

 

 

$

1,090

 

 

$

—

 

 

$

35,710

 

 

$

—

 

 

$

—

 

 

$

86,014

 

(1) As discussed in FN 2, Restatement of Previously Issued Financial Statements, the Company identified an Error in its historical financial statements related to the change in fair value due to instrument specific credit risk for the Revenue Interest Financing and RTW Convertible Notes, as well as a change in fair value of the PIPE Conversion Option. The only restated numbers in the table above relate to the

'Change in fair value' and 'Change in fair value - OCI' for both the Revenue Interest Financing and RTW Convertible Notes, as well as the 'Change in fair value' related to the PIPE Conversion Option.

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, Term Loan Derivative Liability, and RTW Convertible Notes at each period is recorded as a component of Other income (expense) 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 and RTW Convertible Notes, which is recorded as a component of other comprehensive loss.