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What changed in ALLURION TECHNOLOGIES, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ALLURION TECHNOLOGIES, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+537 added−437 removedSource: 10-K (2025-03-27) vs 10-K (2024-03-26)

Top changes in ALLURION TECHNOLOGIES, INC.'s 2024 10-K

537 paragraphs added · 437 removed · 317 edited across 4 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

211 edited+160 added−46 removed464 unchanged
Biggest changeBased on our recurring losses and expectations to incur significant expenses and negative cash flow for the foreseeable future, the need to raise additional capital to finance our future operations and debt service payments, and the potential of being unable to remain in compliance with certain financial covenants under the Fortress Term Loan, our independent registered public accounting firm has included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2023 expressing substantial doubt about our ability to continue as a going concern, and we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that the consolidated financial statements for December 31, 2023 are issued.
Biggest changeBased on our recurring losses from operations incurred since inception, the expectation of continuing operating losses for the foreseeable future, and the potential need to raise additional capital to finance our future operations and debt service payments, we have concluded that there is 65 substantial doubt about our ability to continue as a going concern for a period of one year from the date that the consolidated financial statements for the year ended December 31, 2024 are issued.
We may acquire other businesses or form joint ventures or make investments in other companies or technologies in the future.
We may acquire other businesses, form joint ventures or make investments in other companies or technologies in the future.
Federal and state lawmakers regularly propose and, at times, enact legislation, that could result in significant changes to the health care system, some of which are intended to contain or reduce the costs of medical products and services. For example, one of the most significant health care reform measures in decades, ACA, was enacted in 2010.
Federal and state lawmakers regularly propose and, at times, enact legislation, that could result in significant changes to the health care system, some of which are intended to contain or reduce the costs of medical products and services. For example, one of the most significant health care reform measures in decades, the ACA, was enacted in 2010.
If we are approved by the FDA to market our products in the U.S., we could be subject to health care fraud and abuse, transparency, and patient privacy regulation by both the federal government and the states in which we conduct our business. For more information, see section entitled “ Business – Other U.S.
If we are approved by the FDA to market our products in the U.S., we could be subject to health care fraud and abuse, transparency, and patient privacy regulation by both the federal government and the states in which we conduct our business. For more information, see the section entitled “ Business – Other U.S.
Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. Changes in the interpretation of patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products. In the U.S., the U.S.
Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. Changes in the interpretation of patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products. In the United States, the U.S.
Moreover, this control over the nomination of directors to our board of directors may also adversely affect the trading price for our Common Stock to the extent investors perceive disadvantages in owning stock of a company with these corporate governance provisions.
Moreover, this control over the nomination of directors to our Board may also adversely affect the trading price for our common stock to the extent investors perceive disadvantages in owning stock of a company with these corporate governance provisions.
Among others, these provisions include the following: • our board of directors is divided into three classes with staggered three-year terms which may delay or prevent a change of our management or a change in control; • our board of directors has the right to elect directors to fill a vacancy created by the expansion of our board of directors or the resignation, death, or removal of a director, which will prevent stockholders from being able to fill vacancies on our board of directors; • our stockholders are not able to act by written consent, and as a result, a holder, or holders, controlling a majority of our shares are not be able to take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings; • our Charter does not allow cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • amendments of our Charter and Bylaws require the approval of stockholders holding 66 2/3% of our outstanding voting shares (unless amended by our board of directors); • our stockholders are required to provide advance notice and additional disclosures in order to nominate individuals for election to our board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of Allurion; and • our board of directors is able to issue, without stockholder approval, preferred shares with voting or other rights or preferences that could impede the success of any attempt to acquire us.
Among others, these provisions include the following: • our Board is divided into three classes with staggered three-year terms, which may delay or prevent a change of our management or a change in control; • our Board has the right to elect directors to fill a vacancy created by the expansion of our board of directors or the resignation, death, or removal of a director, which will prevent stockholders from being able to fill vacancies on our board of directors; • our stockholders are not able to act by written consent, and as a result, a holder, or holders, controlling a majority of our shares are not be able to take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings; • our Charter does not allow cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • amendments of our Charter and Bylaws require the approval of stockholders holding 66 2/3% of our outstanding voting shares (unless amended by our board of directors); • our stockholders are required to provide advance notice and additional disclosures in order to nominate individuals for election to our board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of Allurion; and • our Board is able to issue, without stockholder approval, preferred shares with voting or other rights or preferences that could impede the success of any attempt to acquire us.
These sales, or the perception in the market that the holders of a large number of shares of our common stock intend to sell shares, could increase the volatility of the market price of our common stock or result in a significant decline in the public trading price of our common stock.
These sales, or the perception in the market that the holders of a large number of shares of our common stock intend to sell shares, could increase the volatility of the market price of our common stock or result in a significant decline in the public trading price of our common stock.
We are “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act ("Section 404"), reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements, and exemptions 65 from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We are “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act ("Section 404"), reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
For example: • it is possible that one or more of our pending patent applications will not become an issued patent or, if issued, that the patent(s) claims will have sufficient scope to protect all of our planned products, provide us with commercially viable patent protection or provide us with any competitive advantages; • if our pending applications issue as patents, they may be challenged by third parties as invalid or unenforceable under U.S. or foreign laws; • we may not successfully commercialize all of our planned products, if approved, before our relevant patents expire; • we may not be the first to make the inventions covered by each of our patents and pending patent applications; or • we may not develop additional proprietary technologies or products that are separately patentable.
For example: • it is possible that one or more of our pending patent applications will not become an issued patent or, if issued, that the patent(s) claims will have sufficient scope to protect all of our planned products, provide us with commercially viable patent protection or provide us with any competitive advantages; • if our pending applications issue as patents, they may be challenged by third parties as invalid or unenforceable under U.S. or foreign laws; • we may not successfully commercialize all of our planned products, if approved, before our relevant patents expire; 56 • we may not be the first to make the inventions covered by each of our patents and pending patent applications; or • we may not develop additional proprietary technologies or products that are separately patentable.
The FDA can delay, limit, or deny approval of a product for many reasons, including, but not limited, to: • a product may not be deemed to be safe and effective; • the FDA may not find the data from clinical trials and preclinical studies sufficient; • the opportunity for bias in the clinical trials as a result of the open-label design may not be adequately handled and may cause our trial to fail; • the FDA may not approve suppliers’ processes or facilities; or • the FDA may change its approval policies or adopt new regulations.
The FDA can delay, limit, or deny approval of a product for many reasons, including, but not limited, to: • a product may not be deemed to be safe and effective; • the FDA may not find the data from clinical trials and preclinical studies sufficient; • the opportunity for bias in the clinical trials as a result of the open-label design may not be adequately handled and may cause our trial to fail; • the FDA may not approve suppliers’ processes or facilities; or 36 • the FDA may change its approval policies or adopt new regulations.
In addition, Chardan is not obligated to buy any Common Stock under the Purchase Agreement if such shares, when aggregated with all other Common Stock then beneficially owned by Chardan and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in Chardan beneficially owning Common Stock in excess of 4.99% of our outstanding voting power or shares of Common Stock.
In addition, Chardan is not obligated to buy any common stock under the ChEF Purchase Agreement if such shares, when aggregated with all other common stock then beneficially owned by Chardan and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in Chardan beneficially owning common stock in excess of 4.99% of our outstanding voting power or shares of common stock.
If we identify additional material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or, once required, if our independent registered public accounting firm is unable to attest that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could decrease.
If we identify additional material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or, once required, if our independent registered public accounting firm is unable to attest that our internal 71 control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decrease.
Numerous unforeseen events during, or as a result of, preclinical and clinical trials could occur, which would delay or prevent our ability to receive regulatory approval or commercialize the Allurion Balloon or any of our future products, including the following: • preclinical studies and clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional studies or abandon product development programs; • the number of patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, or patients may drop out of these clinical studies at a higher rate than we anticipate; • the cost of preclinical studies and clinical trials may be greater than we anticipate; • third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might suspend or terminate clinical trials of our products for various reasons, including a finding that our products have unanticipated serious side effects or other unexpected characteristics, or that the trial subjects are being exposed to unacceptable health risks; • regulators may not approve our proposed clinical development plans; • regulators or independent institutional review boards ("IRBs") may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • regulators or IRBs may require that we, or our investigators, suspend or terminate clinical studies for various reasons, including non-compliance with regulatory requirements; • regulators in countries where our products are currently marketed may require that we suspend commercial distribution if there is non-compliance with regulatory requirements or safety concerns; • the supply or quality of our products or other materials necessary to conduct clinical studies of our products may be insufficient or inadequate; and • the enactment of new regulatory requirements in the EU under the Medical Device Regulation ("MDR") effective since May 26, 2021 may make approval times longer and standards more difficult to pass.
Numerous unforeseen events during, or as a result of, preclinical and clinical trials could occur, which would delay or prevent our ability to receive regulatory approval or commercialize the Allurion Balloon or any of our future products, including the following: • preclinical studies and clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional studies or abandon product development programs; • the number of patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, or patients may drop out of these clinical studies at a higher rate than we anticipate; • the cost of preclinical studies and clinical trials may be greater than we anticipate; • third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might suspend or terminate clinical trials of our products for various reasons, including a finding that our products have unanticipated serious side effects or other unexpected characteristics, or that the trial subjects are being exposed to unacceptable health risks; • regulators may not approve our proposed clinical development plans; • regulators or independent institutional review boards ("IRBs") may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • regulators or IRBs may require that we, or our investigators, suspend or terminate clinical studies for various reasons, including non-compliance with regulatory requirements; • regulators in countries where our products are currently marketed may require that we suspend commercial distribution if there is non-compliance with regulatory requirements or safety concerns; • the supply or quality of our products or other materials necessary to conduct clinical studies of our products may be insufficient or inadequate; and • the enactment of new regulatory requirements in the EU under the MDR effective since May 26, 2021 may make approval times longer and standards more difficult to pass.
In addition, if we sell a substantial number of shares of our Common Stock to Chardan under the Purchase Agreement, or if investors expect that we will do so, the actual sales of shares of our Common Stock or the mere existence of our arrangement with Chardan may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.
In addition, if we sell a substantial number of shares of our common stock to Chardan under the ChEF Purchase Agreement, or if investors expect that we will do so, the actual sales of shares of our common Stock or the mere existence of our arrangement with Chardan may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.
An adverse determination in any such challenge may result in loss of the patent or in patent application or patent claims being narrowed, invalidated or held unenforceable, in whole or in part, or in denial of the patent 51 application or loss or reduction of the scope of one or more claims of the patent or patent application, any of which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products.
An adverse determination in any such challenge may result in loss of the patent or in patent application or patent claims being narrowed, invalidated or held unenforceable, in whole or in part, or in denial of the patent application or loss or reduction of the scope of one or more claims of the patent or patent application, any of which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products.
Any such challenge, if successful, could limit patent protection for our technology and products and/or materially harm our business. Even if the patent applications we rely on issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage.
Any such challenge, if successful, could limit patent protection for our technology and products and/or materially harm our business. 55 Even if the patent applications we rely on issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage.
In addition, any amortization or charges resulting from the costs of acquisitions could increase our expenses. If changes in the economy and/or consumer spending, consumer preference and other trends reduce consumer demand for our products, our sales and profitability would suffer. We are subject to the risks arising from adverse changes in general economic and market conditions.
In addition, any amortization or charges resulting from the costs of acquisitions could increase our expenses. 43 If changes in the economy and/or consumer spending, consumer preference and other trends reduce consumer demand for our products, our sales and profitability would suffer. We are subject to the risks arising from adverse changes in general economic and market conditions.
We have also hired additional senior level experienced staff with public company experience and upgraded our enterprise resource planning system to SAP in August of 2022. However, we cannot assure you that the measures we are taking to remediate the material weaknesses will prevent or avoid potential future material weaknesses.
We have also hired additional senior level experienced staff with public company experience and upgraded our enterprise resource planning system to SAP in August of 2022. However, we cannot assure you that the measures we have taken and are taking to remediate the material weaknesses will prevent or avoid potential future material weaknesses.
Despite the time and expense exerted, failure can occur at any stage, and we could encounter problems that cause us to abandon or repeat clinical trials, or perform additional preclinical studies and clinical trials. For example, we previously conducted a clinical trial on the Allurion Balloon and submitted a PMA based on data from that trial.
Despite the time and expense exerted, failure can occur at any stage, and we could encounter problems that cause us to abandon or repeat clinical trials, or perform additional preclinical studies and clinical trials. For example, we previously conducted a clinical trial on the Allurion Balloon and submitted a PMA application based on data from that trial.
Any such penalties or curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant 47 legal expenses and divert our management’s attention from the operation of our business.
Any such penalties or curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
Although many of these health care providers are accustomed to selling cash-pay services in their practices, some are primarily accustomed to providing services that are reimbursed by third-party payors. As a result, these health care providers may need to augment their administrative staff and billing procedures to address the logistics of a self-pay practice.
Although many of these health care providers are accustomed to selling cash-pay services in their practices, some are primarily accustomed to providing services that are reimbursed by third-party payors. As a result, these health care providers may 31 need to augment their administrative staff and billing procedures to address the logistics of a self-pay practice.
In addition, job 40 candidates and existing employees often consider the value of the stock awards they receive in connection with their employment. If the perceived value of our stock awards declines, either because we are a public company or otherwise, it may harm our ability to recruit and retain highly skilled employees.
In addition, job candidates and existing employees often consider the value of the stock awards they receive in connection with their employment. If the perceived value of our stock awards declines, either because we are a public company or otherwise, it may harm our ability to recruit and retain highly skilled employees.
Moreover, some third parties are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, in addition to country-specific privacy and data security risk given current legal and regulatory 43 environments. Failure of third parties to meet their contractual, regulatory, and other obligations may materially affect our business.
Moreover, some third parties are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, in addition to country-specific privacy and data security risk given current legal and regulatory environments. Failure of third parties to meet their contractual, regulatory, and other obligations may materially affect our business.
Even if we are successful in defending against such claims, a dispute could result in substantial costs and be a distraction to our senior management and scientific personnel. 53 We may become involved in legal proceedings to protect or enforce our intellectual property rights, which could be expensive, time consuming, or unsuccessful.
Even if we are successful in defending against such claims, a dispute could result in substantial costs and be a distraction to our senior management and scientific personnel. We may become involved in legal proceedings to protect or enforce our intellectual property rights, which could be expensive, time consuming, or unsuccessful.
These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. 55 Many companies have encountered significant problems in protecting and defending intellectual property rights in international jurisdictions.
These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in international jurisdictions.
There is the risk that the limits we obtained for our cyber liability insurance may not cover the total loss experienced in the event of a data security incident, including the financial loss, legal costs, and business and reputational harm, particularly if there is an interruption to our systems.
Finally, there is the risk that the limits we obtained for our cyber liability insurance may not cover the total loss experienced in the event of a data security incident, including the financial loss, legal costs, and business and reputational harm, particularly if there is an interruption to our systems.
We expect that our future financial results will depend primarily on our success in launching, selling and supporting the Allurion Balloon and other products that are part of our weight loss platform. This will require us to be successful in a range of 60 activities, including manufacturing, marketing, and selling the Allurion Balloon.
We expect that our future financial results will depend primarily on our success in launching, selling and supporting the Allurion Balloon and other products that are part of our weight loss platform. This will require us to be successful in a range of activities, including manufacturing, marketing, and selling the Allurion Balloon.
We are in the process of designing and implementing our internal controls over financial reporting, which will be time-consuming, costly and complicated. We have identified gaps in our internal control environment in the past and cannot provide assurances that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.
We are in the process of designing and implementing our internal controls over financial reporting, which is time-consuming, costly and complicated. We have identified gaps in our internal control environment in the past and cannot provide assurances that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.
Additionally, we expect that the initial FDA approval of the Allurion Balloon, if obtained, will be subject to a lengthy and expensive follow-up period, during which we must monitor patients enrolled in clinical studies and collect data on their safety 34 outcomes.
Additionally, we expect that the initial FDA approval of the Allurion Balloon, if obtained, will be subject to a lengthy and expensive follow-up period, during which we must monitor patients enrolled in clinical studies and collect data on their safety outcomes.
In addition, on December 18, 2023, we entered into the Purchase Agreement with Chardan related to the Chardan Equity Facility. Pursuant to the Purchase Agreement, Chardan shall purchase from us up to $100.0 million of shares of our Common Stock, upon the terms and subject to the conditions and limitations set forth in the Purchase Agreement.
In addition, on December 18, 2023, we entered into the ChEF Purchase Agreement with Chardan related to the Chardan Equity Facility. Pursuant to the ChEF Purchase Agreement, Chardan shall purchase from us up to $100.0 million of shares of our common stock, upon the terms and subject to the conditions and limitations set forth in the ChEF Purchase Agreement.
We may also be subject to liability for a misunderstanding of, or inappropriate reliance upon, the information we provide. If we cannot successfully defend ourselves against claims that the Allurion Balloon or our 42 other current or future products caused injuries, we may incur substantial liabilities.
We may also be subject to liability for a misunderstanding of, or inappropriate reliance upon, the information we provide. If we cannot successfully defend ourselves against claims that the Allurion Balloon or our other current or future products caused injuries, we may incur substantial liabilities.
In addition, parties making claims against us may be able to sustain the costs of complex patent litigation more effectively 49 than we can because they have substantially greater resources, and we may not have sufficient resources to bring these actions to a successful conclusion.
In addition, parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources, and we may not have sufficient resources to bring these actions to a successful conclusion.
While we typically require employees, consultants and contractors who may develop intellectual property on our behalf to execute agreements assigning such intellectual property to us, we may be unsuccessful in obtaining execution of assignment agreements with each party who in fact develops intellectual property that we regard as our own.
While we typically require employees, consultants and contractors who may develop intellectual property on our behalf to execute agreements assigning such intellectual property to us, we may be unsuccessful in obtaining execution of assignment 57 agreements with each party who in fact develops intellectual property that we regard as our own.
If health care providers are unable or unwilling to make such changes, adoption of our products may be slower than anticipated. 29 Our success will also depend on the ability and willingness of patients to pay out-of-pocket for treatment with our products.
If health care providers are unable or unwilling to make such changes, adoption of our products may be slower than anticipated. Our success will also depend on the ability and willingness of patients to pay out-of-pocket for treatment with our products.
While we expect to continue to grow headcount and operations over the long-term, in January 2024 we announced a restructuring plan designed to more closely align our cost structure with near-term revenue expectations, improve our capital structure, and accelerate the path to profitability (the “Plan”).
While we expect to continue to grow headcount and operations over the long-term, in January 2024 we announced a restructuring plan designed to more closely align our cost structure with near-term revenue expectations, improve our capital structure, and accelerate the path to profitability.
Administering any of our products to 44 humans may produce undesirable side effects, which could interrupt, delay or cause suspension of clinical trials of our planned products and result in the FDA or other regulatory authorities denying approval of our products for any or all targeted indications.
Administering any of our products to humans may produce undesirable side effects, which could interrupt, delay or cause suspension of clinical trials of our planned products and result in the FDA or other regulatory authorities denying approval of our products for any or all targeted indications.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our current and future products could be delayed. 57 We rely on internet infrastructure, bandwidth providers, third-party computer hardware and software and other third parties for providing services to our customers and patients, and any failure or interruption in the services provided by these third parties could expose us to litigation and negatively impact our relationships with customers and patients, adversely affecting our operating results.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our current and future products could be delayed. 61 We rely on internet infrastructure, bandwidth providers, third-party computer hardware and software and other third parties for providing services to our customers and patients, and any failure or interruption in the services provided by these third parties could expose us to litigation and negatively impact our relationships with customers and patients, adversely affecting our operating results.
If the Allurion Balloon or our future products fail to demonstrate safety and efficacy in further clinical trials that may be required for FDA approval, or do not gain regulatory approval, our business and results of operations will be harmed.
If the Allurion Balloon or our future products fail to demonstrate safety and efficacy in further or new clinical trials that may be required for FDA approval, or do not gain regulatory approval, our business and results of operations will be harmed.
You may not be able to resell your shares at an attractive price due to a number of factors, including the following: • our ability to successfully commercialize, and realize revenues from sales of, the Allurion Balloon; • the success of competitive products or technologies; • results of clinical trials of the Allurion Balloon or other current or future products or those of our competitors; • regulatory or legal developments in the U.S. and other countries, especially changes in laws or regulations applicable to our products; • introductions and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions or announcements; • actions taken by regulatory agencies with respect to our products, clinical trials, manufacturing processes or sales and marketing terms; • variations in our financial results or those of companies that are perceived to be similar to us; • the success of our efforts to acquire or in-license additional products or planned products; • developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners; • developments concerning our ability to bring our manufacturing processes to scale in a cost-effective manner; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products; • our ability or inability to raise additional capital and the terms on which we raise it; • the recruitment or departure of key personnel; • changes in the structure of health care payment systems; • market conditions in the medical device, pharmaceutical and biotechnology sectors; • actual or anticipated changes in earnings estimates or changes in securities analyst recommendations regarding our Common Stock, other comparable companies or our industry generally; • trading volume of our Common Stock; • guidance or projections, if any, that we provide to the public, any changes in this guidance or projections or our failure to meet this guidance or projections; • sales of our Common Stock by us or our stockholders; • general economic and political conditions such as recessions, interest rates, fuel prices, trade wars, pandemics (such as COVID-19), currency fluctuations, geopolitical conflicts and acts of war or terrorism; • the effects of natural disasters, terrorist attacks and the spread and/or abatement of infectious diseases, including with respect to potential operational disruptions, labor disruptions, increased costs, and impacts to demand related thereto; and • the other risks described in this “Risk Factors” section.
You may not be able to resell your shares at an attractive price due to a number of factors, including the following: • our ability to successfully commercialize, and realize revenues from sales of, the Allurion Balloon and other products and services; • the success of competitive products or technologies; • results of clinical trials of the Allurion Balloon or other current or future products or those of our competitors; 67 • regulatory or legal developments in the U.S. and other countries, especially changes in laws or regulations applicable to our products; • introductions and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions or announcements; • actions taken by regulatory agencies with respect to our products, clinical trials, manufacturing processes or sales and marketing terms; • variations in our financial results or those of companies that are perceived to be similar to us; • the success of our efforts to acquire or in-license additional products or planned products; • developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners; • developments concerning our ability to bring our manufacturing processes to scale in a cost-effective manner; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products; • our ability or inability to raise additional capital and the terms on which we raise it; • the recruitment or departure of key personnel; • changes in the structure of health care payment systems; • market conditions in the medical device, pharmaceutical and biotechnology sectors; • actual or anticipated changes in earnings estimates or changes in securities analyst recommendations regarding our common stock, other comparable companies or our industry generally; • trading volume of our common stock; • guidance or projections, if any, that we provide to the public, any changes in this guidance or projections or our failure to meet this guidance or projections; • sales of our common stock by us or our stockholders; • general economic and political conditions such as recessions, interest rates, fuel prices, trade wars, pandemics (such as COVID-19), currency fluctuations, geopolitical conflicts, and acts of war or terrorism; • the effects of natural disasters, terrorist attacks and the spread and/or abatement of infectious diseases, including with respect to potential operational disruptions, labor disruptions, increased costs, and impacts to demand related thereto; and • the other risks described in this “ Risk Factors ” section.
Many companies in the pharmaceutical, biotechnology and medical device industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and we cannot be certain that we will not face similar setbacks.
Many companies in the pharmaceutical, biotechnology and medical device industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and we cannot be certain that we will not face 37 similar setbacks.
Our success depends on awareness and the reputation of our brand, which depends on factors such as the safety and quality of our products, our communication activities, including marketing and education efforts, customer acquisition and retention strategies, and our management of our heath care provider and patient experience.
Our success depends on the reputation and awareness of our brand, which depend on factors such as the safety and quality of our products, our communication activities, including marketing and education efforts, customer acquisition and retention strategies, and our management of our heath care provider and patient experience.
In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the U.S.
In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to 54 the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the U.S.
These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. 56 If we determine to license or acquire third-party intellectual property and we are unable to acquire such intellectual property outright, or obtain licenses to such intellectual property from such third parties when needed or on commercially reasonable terms, our ability to commercialize our products at such time would likely be delayed or we may have to abandon development of that product or program and our business and financial condition could suffer.
These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. 60 If we determine to license or acquire third-party intellectual property and we are unable to acquire such intellectual property outright, or obtain licenses to such intellectual property from such third parties when needed or on commercially reasonable terms, our ability to commercialize our products at such time would likely be delayed or we may have to abandon development of that product or program and our business and financial condition could suffer.
In connection with the audit of our consolidated financial statements as of and for the years ended December 31, 2023 and 2022, we identified material weaknesses in our internal control over financial reporting that we are currently working to remediate, which relate to: (a) insufficient segregation of duties in the financial statement close process; (b) a lack of sufficient levels of staff with public company and technical accounting experience to maintain proper control activities and perform risk assessment and monitoring activities; and (c) insufficient information systems controls, including access and change management controls.
In connection with the audit of our consolidated financial statements as of and for the years ended December 31, 2024 and 2023, we identified material weaknesses in our internal control over financial reporting that we are currently working to remediate, which relate to: (a) insufficient segregation of duties in the financial statement close process; (b) a lack of sufficient levels of staff with public company and technical accounting experience to maintain proper control activities and perform risk assessment and monitoring activities; and (c) insufficient information systems controls, including access and change management controls.
We receive the majority of our revenue from sales to health care providers and other third-party distributors. We extend credit to our customers for a significant portion of our sales and receivables from our customers are not secured by any type of collateral.
We receive the majority of our revenue from sales to health care providers and third-party distributors. We extend credit to our customers for a significant portion of our sales and receivables from our customers are not secured by any type of collateral.
Any failure to develop or maintain effective controls or any difficulties encountered in 66 their implementation or improvement could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements.
Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements.
We may become involved in proceedings, including oppositions, interferences, derivation proceedings inter partes reviews, patent nullification proceedings, or re-examinations, 54 challenging our patent rights or the patent rights of others, and the outcome of any such proceedings are highly uncertain.
We may become involved in proceedings, including oppositions, interferences, derivation proceedings inter partes reviews, patent nullification proceedings, or re-examinations, challenging our patent rights or the patent rights of others, and the outcome of any such proceedings are highly uncertain.
Impacts of such economic weakness include: • falling overall demand for goods and services, leading to reduced profitability; • reduced credit availability; • higher borrowing costs; • reduced liquidity; 41 • volatility in credit, equity and foreign exchange markets; and • bankruptcies.
Impacts of such economic weakness include: • falling overall demand for goods and services, leading to reduced profitability; • reduced credit availability; • higher borrowing costs; • reduced liquidity; • volatility in credit, equity and foreign exchange markets; and • bankruptcies.
Therefore, it is generally considered easier for a competitor or third party to have a U.S. patent invalidated in a USPTO post-grant review or inter partes review proceeding than invalidated in a litigation in a U.S. federal court.
Therefore, it is generally 58 considered easier for a competitor or third party to have a U.S. patent invalidated in a USPTO post-grant review or inter partes review proceeding than invalidated in a litigation in a U.S. federal court.
Although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
Although we already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
We also intend, now and in the future, to continue to improve our operational, financial and management controls and reporting systems and procedures, which may require additional personnel and capital investments and will increase our costs.
We also intend, now and in the future, to 44 continue to improve our operational, financial and management controls and reporting systems and procedures, which may require additional personnel and capital investments and will increase our costs.
The exercise prices of the warrants, in certain circumstances, may be higher than the prevailing market price of our underlying Common Stock and the cash proceeds to us associated with the exercise of warrants are contingent upon our stock price.
The exercise prices of the warrants, in certain circumstances, may be higher than the prevailing market price of our underlying common stock and the cash proceeds to us associated with the exercise of such warrants are contingent upon our stock price.
We have obtained a CE Mark for the Allurion Balloon and are therefore authorized to sell in the EU; however, in order to market in regions such as the United States, the Asia Pacific region and many other jurisdictions, we must obtain separate regulatory approvals or clearances. 32 The procedures for approval vary among countries and can involve additional clinical testing, and the time required to obtain approval or clearance may differ from that required to obtain the CE Mark or FDA approval.
We have obtained a CE Mark for the Allurion Balloon and are therefore authorized to sell in the EU; however, in order to market in regions such as the United States, the Asia Pacific region and many other jurisdictions, we must obtain separate regulatory approvals or clearances. 34 The procedures for approval vary among countries and can involve additional clinical testing, and the time required to obtain approval or clearance may differ from that required to obtain the CE Mark or FDA approval.
Historically, intragastric balloon products are not reimbursed by third-party payors, although a very limited number of balloon procedures have recently been subject to reimbursement in the U.K. market.
Historically, intragastric balloon products are not reimbursed by third-party payors, although a very limited number of balloon procedures have been subject to reimbursement in the U.K. market.
We cannot assure you that our trademark applications will be approved. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to 52 respond to those rejections, we may be unable to overcome such rejections.
We cannot assure you that our trademark applications will be approved. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections.
Any failure to raise the funds necessary to support our operations may force us to delay, reduce or suspend our planned clinical trials, research and development programs, or other commercialization efforts.
Any 66 failure to raise the funds necessary to support our operations may force us to delay, reduce or suspend our planned clinical trials, research and development programs, or other commercialization efforts .
The securities markets in general, and the market for biotechnology and medical device companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of 62 particular companies.
The securities markets in general, and the market for biotechnology and medical device companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.
For example, the Exchange Act requires, among other 64 things, that we file annual, quarterly and current reports with respect to our business and results of operations.
For example, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations.
The implementation of cost-containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.
The implementation of cost-containment measures or other healthcare reforms 49 may prevent us from being able to generate revenue, attain profitability, or commercialize our products.
We remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial.
We remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and 45 protocols for the trial.
This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities.
This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We expect to invest substantial resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities.
Sales of the Allurion Balloon and related accessories, which have occurred outside of the U.S. because we have not yet obtained the regulatory approval required to sell our products within the U.S., accounted for substantially all of our revenues for the years ended December 31, 2023 and 2022, and we expect our revenues to continue to be driven primarily by sales of the Allurion Balloon.
Sales of the Allurion Balloon and related accessories, which have occurred outside of the U.S. because we have not yet obtained the regulatory approval required to sell our products within the U.S., accounted for substantially all of our revenues for the years ended December 31, 2024 and 2023, and we expect our revenues to continue to be driven primarily by sales of the Allurion Balloon.
Although we launched the Allurion Balloon commercially in January 2016 and have placed over 130,000 units to date in various countries outside the U.S., we do not have as much post-market surveillance data as our competitors and may not have clearly identified all possible or actual risks of our products.
Although we launched the Allurion Balloon commercially in January 2016 and have placed over 150,000 units to date in various countries outside the U.S., we do not have as much post-market surveillance data as our competitors and may not have clearly identified all possible or actual risks of our products.
In addition, our ability to complete the restructuring plan and achieve the anticipated benefits from the Plan within the expected time frame, or at all, are subject to successful execution of management’s estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control.
In addition, our ability to complete the restructuring plans and achieve the anticipated benefits from the plans within the expected time frame, or at all, are subject to successful execution of management’s estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control.
Most recently, on December 10, 2020, HHS issued a Notice of Proposed Rulemaking (the public comment period to which was further extended in March 2021) which, if finalized, would make changes to some of HIPAA’s regulatory requirements, which would impact us, to the extent we are a business associate.
More recently, on December 10, 2020, HHS issued a Notice of Proposed Rulemaking (the public comment period to which was further extended in March 2021) which, if finalized, would make changes to some of HIPAA’s regulatory requirements, which would impact us, to the extent we are a business associate.
We evaluated the accounting treatment of our Earn-Out Shares and determined to classify such shares as liabilities measured at fair value. The fair value of such shares is remeasured on a quarterly basis over the earn-out period with changes in the estimated fair value recorded in other income (expense) on the consolidated statement of operations and comprehensive loss.
We evaluated the accounting treatment of our Shares and determined to classify such shares as liabilities measured at fair value. The fair value of such shares is remeasured on a quarterly basis over the period with changes in the estimated fair value recorded in other income (expense) on the consolidated statement of operations and comprehensive loss.
Market acceptance of our products could be negatively impacted by many factors, including: • the willingness of patients to pay out-of-pocket for the Allurion Program in the absence of coverage and reimbursement for such program; • the failure of our products to achieve and maintain wide acceptance among patients who are obese and overweight, their health care providers, third-party payors and key opinion leaders in the weight loss treatment community; 30 • lack of evidence supporting the safety, ease-of-use or other perceived benefits of the Allurion Balloon over competitive products or other currently available weight loss treatment alternatives; • perceived risks or uncertainties, or actual adverse events or other undesirable side effects, associated with the use of our gastric balloons, or components thereof, or of similar products or technologies of our competitors; • any adverse legal action, including products liability litigation, against us or our competitors relating to the Allurion Balloon or similar products or technologies; • the withdrawal or modification of any regulatory approvals for our products; and • results of clinical studies relating to the Allurion Balloon or similar competitive products.
Market acceptance of our products could be negatively impacted by many factors, including: • the unwillingness of patients to pay out-of-pocket for the Allurion Program in the absence of coverage and reimbursement for such program; 32 • the failure of our products to achieve and maintain wide acceptance among patients who are obese and overweight, their health care providers, third-party payors and key opinion leaders in the weight loss treatment community; • lack of evidence supporting the safety, ease-of-use or other perceived benefits of the Allurion Balloon over competitive products or other currently available weight loss treatment alternatives; • perceived risks or uncertainties, or actual adverse events or other undesirable side effects, associated with the use of our gastric balloon, or components thereof, or of similar products or technologies of our competitors; • any adverse legal action, including products liability litigation, against us or our competitors relating to the Allurion Balloon or similar products or technologies; • the withdrawal or modification of any regulatory approvals for our products; and • results of clinical studies relating to the Allurion Balloon or similar competitive products.
In addition, it is also critical for health care providers to be educated and trained on best practices in order to achieve optimal results, including patient selection and eligibility criteria, as well as complementary methods of use such as diet or behavioral modification programs.
In addition, it is also critical for health care providers to be educated and trained on best practices in order to achieve optimal results, including patient selection and eligibility criteria and patient follow-up, as well as complementary methods of use such as diet or behavioral modification programs.
The new forms of standard contractual clauses have replaced the standard contractual clauses that were adopted previously under the Data Protection Directive. The UK is not subject to the European Commission’s new standard contractual clauses but has published its own transfer mechanism, the International Data Transfer Agreement, which enables transfers from the UK.
The new forms of standard contractual clauses have replaced the standard contractual clauses that were adopted previously under the Data Protection Directive. The UK is not subject to the European Commission’s new standard contractual clauses but has published its own transfer mechanism, the International Data Transfer Agreement, which enables transfers from the United Kingdom.
Sales of substantial numbers of such 69 shares in the public market could adversely affect the market price of our Common Stock, the impact of which increases as the value of our stock price increases. Our warrants may not be exercised at all and we may not receive any cash proceeds from the exercise of the warrants.
Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock, the impact of which increases as the value of our stock price increases. Our existing warrants may not be exercised at all and we may not receive any cash proceeds from the exercise of the warrants.
Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain approval from the FDA or a comparable foreign regulatory authority.
Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless fail to obtain approval from the FDA or a comparable foreign regulatory authority.
Moreover, if the relevant laws and regulations change, or are interpreted and applied in a manner that is inconsistent with our data practices 59 or the operation of our products, we may need to expend resources in order to change our business operations, data practices, or the manner in which our products operate.
Moreover, if the relevant laws and regulations change, or are interpreted and applied in a manner that is inconsistent with our data practices or the operation of our products, we may need to expend resources in order to change our business operations, data 63 practices, or the manner in which our products operate.
The value of our Common Stock may fluctuate and may not exceed the exercise price of the warrants at any given time.
The value of our common stock may fluctuate and may not exceed the exercise price of the existing warrants at any given time.
To raise capital, we may sell Common Stock, convertible securities or other equity securities in one or more transactions at prices and in a manner as determined from time to time. If we sell Common Stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales.
To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner as determined by our Board from time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales.
If we do not successfully continue our education and marketing efforts, particularly to health care systems and large institutions, or if existing users decrease their level of engagement, our revenue, financial results and business may be significantly harmed.
If we do not successfully conduct our education and marketing efforts, particularly to health care systems and large institutions, or if existing users decrease their level of engagement, our revenue, financial results and business may be significantly harmed.
If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as raising additional capital on terms that may be unfavorable or selling assets or portions of our business.
If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as raising additional capital on terms that may be unfavorable, selling assets or portions of our business, or ceasing operations.
In addition, our expenses or tax-related costs may increase in greater measure than our revenues, negatively impacting our operating results. 31 Furthermore, our sales force may operate independently with limited day-to-day oversight from management.
In addition, our expenses or tax-related costs may increase in greater measure than our revenues, negatively impacting our operating results. 33 Furthermore, our sales force may operate independently with limited day-to-day oversight from management.
They may engage in sales practices that increase certain risks to our business, including the risk of scrutiny from regulatory authorities and the risk that we violate anti-corruption regulations in one or more countries. These and other independent actions may result in unexpected costs, news that might impair our reputation or revenues, litigation in various jurisdictions, and/or sanctions.
They may engage in sales practices that increase certain risks to our business, including the risk of scrutiny from regulatory authorities and the risk that we violate anti-corruption regulations in one or more countries. These and other independent actions may result in unexpected costs, news that might impair our reputation or revenues, actions by regulatory authorities, litigation, and/or sanctions.
In addition, although our contract terms require our distributors to comply with all applicable laws regarding the sale of our products, including anti-competition, anti-money laundering, sanctions laws and FDA and other health care regulations, we may not be able to ensure proper compliance.
I n addition, although our contract terms require our distributors to comply with all applicable laws regarding the sale of our products, including anti-competition, anti-money laundering, sanctions laws and FDA and other health care regulations, we may not be able to ensure proper compliance.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe InfoSec Committee meets on a regular basis to review and discuss the direction of the Company’s cybersecurity program. Our acting CISO is responsible for the day-to-day oversight of the assessment and management of cybersecurity risks. The individual who is currently in this role has approximately 25 years of experience in information technology.
Biggest changeOur acting CISO, who is also our VP of Software Engineering, is responsible for the day-to-day oversight of the assessment and management of our information security program and cybersecurity risks. The individual who is currently in this role has approximately 25 years of experience in information technology. The Board also engages in oversight of cybersecurity risks.
Additionally, the Company’s employees go through cybersecurity awareness training covering topics such as general cybersecurity best practices, phishing, data protection, password protection, and network security. 71 We have not identified any cybersecurity incidents or threats that have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Additionally, the Company’s employees go through cybersecurity awareness training covering topics such as general cybersecurity best practices, phishing, data protection, password protection, and network security. We have not identified any cybersecurity incidents or threats that have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Our corporate headquarters are located in Natick, Massachusetts, where we lease approximately 9,909 square feet of office space pursuant to a lease agreement which commenced on June 15, 2016 and expires on November 30, 2025.
Our corporate headquarters are located in Natick, Massachusetts, where we lease approximately 9,900 square feet of office space pursuant to a lease agreement that commenced on June 15, 2016 and expires on November 30, 2025.
Outside of the U.S., we lease approximately 292 square meters of office space in Paris, France, which represents our largest sales office. We believe that our existing facilities are suitable and adequate for our needs.
Outside of the United States, we lease approximately 292 square meters of office space in Paris, France, which represents our largest sales office. We believe that our existing facilities are suitable and adequate for our needs.
The Board engages in oversight of cybersecurity risks. With the input of the InfoSec Committee, our CISO may provide periodic updates to the Board on matters related to cybersecurity as needed. Ite m 2. Properties.
With the input of the InfoSec Committee, our CISO may provide periodic updates to the Board on matters related to cybersecurity as needed . Ite m 2. Properties.
We also lease approximately 12,678 square feet of office space for research and development in Natick, Massachusetts pursuant to a lease agreement which commenced on January 10, 2020 and expires on March 31, 2028.
We also lease approximately 12,700 square feet of office space for research and development in Natick, Massachusetts pursuant to a lease 78 agreement that commenced on January 10, 2020 and expires on March 31, 2028.
The InfoSec Committee is currently made up of a cross-disciplinary team, including the Company’s acting Chief Information Security Officer (CISO), Chief Financial Officer, Chief Legal Officer, VP of People, IT director, VP of Software Engineering, Senior Director of R&D, and VP of Global Marketing.
The InfoSec Committee is currently made up of a cross-disciplinary team, including the Company’s acting Chief Information Security Officer (CISO), Chief Legal Officer, VP of People, Senior Director of R&D & Engineering, VP of Global Marketing, Medical Affairs and our Senior Corporate Counsel.
Additionally, we lease approximately 10,200 square feet of manufacturing space in Natick, Massachusetts pursuant to a lease agreement which commenced on January 8, 2018 and expires on February 28, 2028. We also lease approximately 4,250 square feet of manufacturing space in Natick, Massachusetts pursuant to a lease agreement which commenced on July 1, 2021 and expires on June 30, 2024.
Additionally, we lease approximately 10,200 square feet of manufacturing space in Natick, Massachusetts pursuant to a lease agreement that commenced on January 8, 2018 and expires on February 28, 2028. We also lease approximately 1,870 square feet of manufacturing space in Natick, Massachusetts pursuant to a lease agreement that commenced on July 1, 2021 and expires on March 31, 2025.
However, like other companies in our industry, we and our third-party vendors may, from time to time, experience threats and security incidents that could effect our information or systems. For more information, please see Item 1A - Risk Factors. Governance Related to Cybersecurity Risks Our cybersecurity risk management program is managed by our Information Security Management Committee (the “InfoSec Committee”).
However, like other companies in our industry, we and our third-party vendors may, from time to time, experience threats and security incidents that could effect our information or systems. For more information, please see the section entitled "Risk Factors" .
Added
Governance Related to Cybersecurity Risks Our cybersecurity risk management program is managed by our Information Security Management Committee (the “InfoSec Committee”).
Added
The InfoSec Committee meets on a monthly basis to provide oversight of the Company's information security management system ("ISMS"), review the performance and effectiveness of the ISMS, and review and discuss the direction of the Company’s cybersecurity program, among other responsibilities. The committee also performs an annual audit to ensure Allurion's ISMS is effectively implemented and maintained.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

4 edited+1 added−2 removed2 unchanged
Biggest changeDividends We do not intend to pay dividends on our Common Stock unless future profits warrant such action. Sales of Unregistered Securities and Purchases by the Issuer and Affiliated Purchasers All sales of unregistered securities by us during the year ended December 31, 2023 have been previously disclosed.
Biggest changeSales of Unregistered Securities and Purchases by the Issuer and Affiliated Purchasers All sales of unregistered securities by us during the year ended December 31, 2024 have been previously disclosed. There were no purchases of our common stock by the Company or any affiliated purchaser during the quarter ended December 31, 2024. Use of Proceeds Not applicable.
The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in the street name by brokers and other nominees. This number of holders of record also does not include stockholders who shares may be held in trust by other entities.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in the street name by brokers and other nominees. This number of record holders also does not include stockholders whose shares may be held in trust by other entities.
Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained. It em 4. Mine Safety Disclosures. Not applicable. 72 PA RT II Ite m 5.
Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained. It em 4. Mine Safety Disclosures. Not applicable. 79 PA RT II Ite m 5.
The Company's public warrants to purchase 1.420455 shares of our Common Stock at $8.10 per share trade on the New York Stock Exchange under the symbol "ALUR WS." Holders As of December 31, 2023, there were 249 record holders of our Common Stock and 1 record holder of our Public Warrants.
The Company's public warrants to purchase 0.056818 shares of our common stock at $202.50 per share trade on the New York Stock Exchange under the symbol "ALUR WS." Holders As of March 14, 2025, there were 197 record holders of our common stock and 1 record holder of our Public Warrants.
Removed
There were no purchases of our Common Stock by the Company or any affiliated purchaser during the quarter ended December 31, 2023. Use of Proceeds On August 1, 2023, we consummated the Business Combination. At the closing of the Business Combination, we received $98.8 million in net cash proceeds.
Added
Dividends We do not intend to pay dividends on our common stock unless future profits warrant such action. Equity Plan Information See "Equity Plan Information" under Part III, Item 12 of this Annual Report on Form 10-K for information about our equity plans approved, and not approved, by stockholders.
Removed
We expect to use the net proceeds from the Business Combination, including the proceeds from the related transactions described above, to fund our working capital and for other general corporate purposes. It em 6. [Reserved] 73

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOther Income (Expense), Net Other (expense) income, net consists of interest earned on our invested cash balances, which primarily consist of deposit accounts and money market funds, foreign currency transaction gains and losses and expense associated with our Success Fee derivative liability and Fortress Term Loan derivative liability. 80 Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands): Years Ended December 31, 2023 2022 Change Revenue $ 53,467 $ 64,211 $ (10,744 ) Cost of revenue 11,970 13,485 (1,515 ) Gross profit 41,497 50,726 $ (9,229 ) Operating expenses: Sales and marketing 46,857 50,405 (3,548 ) Research and development 27,694 16,966 10,728 General and administrative 46,024 15,365 30,659 Total operating expenses: 120,575 82,736 37,839 Loss from operations (79,078 ) (32,010 ) (47,068 ) Other income (expense): Interest expense (10,566 ) (4,426 ) (6,140 ) Changes in fair value of warrants 8,364 (821 ) 9,185 Changes in fair value of debt (3,751 ) — (3,751 ) Changes in fair value of Revenue Interest Financing and PIPE conversion option (2,192 ) — (2,192 ) Changes in fair value of earn-out liabilities 29,050 — 29,050 Termination of convertible note side letters (17,598 ) — (17,598 ) Loss on extinguishment of debt (3,929 ) — (3,929 ) Other income (expense), net (643 ) (344 ) (299 ) Total other income (expense): (1,265 ) (5,591 ) 4,326 Loss before income taxes: (80,343 ) (37,601 ) (42,742 ) Provision for income taxes: (264 ) (143 ) (121 ) Net loss $ (80,607 ) $ (37,744 ) $ (42,863 ) Revenue Revenue decreased $10.7 million, or 17%, to $53.5 million for the year ended December 31, 2023, compared to the same period in 2022.
Biggest changeSee Note 10, Fair Value Measurements, for further information . 85 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023 (in thousands): Years Ended December 31, 2024 2023 Change Revenue $ 32,110 $ 53,467 $ (21,357 ) Cost of revenue 10,607 11,970 (1,363 ) Gross profit 21,503 41,497 $ (19,994 ) Operating expenses: Sales and marketing 25,933 46,857 (20,924 ) Research and development 17,369 27,694 (10,325 ) General and administrative 28,399 46,024 (17,625 ) Total operating expenses: 71,701 120,575 (48,874 ) Loss from operations (50,198 ) (79,078 ) 28,880 Other income (expense): Interest expense (2,264 ) (10,566 ) 8,302 Changes in fair value of warrants 17,024 8,364 8,660 Changes in fair value of debt 8,690 (3,751 ) 12,441 Changes in fair value of Revenue Interest Financing and PIPE conversion option (14,321 ) (2,192 ) (12,129 ) Changes in fair value of earn-out liabilities 22,900 29,050 (6,150 ) Termination of convertible note side letters — (17,598 ) 17,598 Loss on extinguishment of debt (8,713 ) (3,929 ) (4,784 ) Other income (expense), net 1,452 (643 ) 2,095 Total other income (expense): 24,768 (1,265 ) 26,033 Loss before income taxes: (25,430 ) (80,343 ) 54,913 Provision for income taxes: (718 ) (264 ) (454 ) Net loss $ (26,148 ) $ (80,607 ) $ 54,459 Revenue Revenue decreased $21.4 million, or 40%, to $32.1 million for the year ended December 31, 2024, compared to the same period in 2023.
In addition to its use by Allurion Balloon patients, we believe the Allurion VCS can potentially be a platform for optimal long-term follow up after other medical and surgical weight loss interventions in the future.
In addition to its use by Allurion Balloon patients, we believe the VCS can potentially be a platform for optimal long-term follow up after other medical and surgical weight loss interventions in the future.
The MCSM utilizes a combination of observable (Level 2) and unobservable (Level 3) inputs which include the trading price and volatility of the underlying common stock, expected term, risk-free interest rates, and expected date of a qualifying event. The determination of the fair value of these financial instruments is complex and highly judgmental due to the significant estimation required.
The MCSM utilizes a combination of observable (Level 2) and unobservable (Level 3) inputs which include the trading price and volatility of the underlying common stock, expected term, risk-free interest rates, and expected date of a qualifying event. The determination of the fair value of these 92 financial instruments is complex and highly judgmental due to the significant estimation required.
Our future capital requirements will depend on many factors, including: • the emergence of competing innovative weight loss experiences and other adverse marketing developments; • the timing and extent of our sales and marketing and research and development expenditures; and • any investments or acquisitions we may choose to pursue in the future.
Our future capital requirements will depend on many factors, including: • the emergence of competing innovative weight loss experiences and other adverse business developments; • the timing and extent of our sales and marketing and research and development expenditures; and • any investments or acquisitions we may choose to pursue in the future.
While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements included in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
While our significant accounting policies are described in more detail in Note 2, Summary of Significant Accounting Policies to our audited consolidated financial statements included in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Cost of Revenue Cost of revenue consists primarily of costs that are closely correlated or directly related to the delivery of our products, including material costs, labor costs, and depreciation expense for fixed assets. Operating Expenses Sales and Marketing Expenses Sales and marketing expenses consist primarily of salaries and related expenses (including commissions) for our sales and marketing personnel.
Cost of Revenue Cost of revenue consists primarily of costs that are closely correlated or directly related to the delivery of our products, including material costs, labor costs, and depreciation expense for fixed assets . 84 Operating Expenses Sales and Marketing Expenses Sales and marketing expenses consist primarily of salaries and related expenses (including commissions) for our sales and marketing personnel.
For our sales to grow, we will also need to obtain regulatory approval of our existing product and any new products or modifications/enhancements to our existing products in the markets that we operate in and new markets as applicable. 78 • Sales force size and effectiveness.
For our sales to grow, we will also need to obtain regulatory approval of our existing product and any new products or modifications/enhancements to our existing products in the markets that we operate in and new markets as applicable. • Sales force size and effectiveness.
The Allurion VCS is comprised of tools to support patients’ weight loss experience, which we believe benefit both patients and health care providers: (A) For Allurion Program patients: Every current Allurion Program patient receives an Allurion Connected Scale and access to our mobile app (the "App"), which integrates data from the Allurion Connected Scale to conveniently monitor weight, body fat, activity, sleep, and several other critical metrics.
The Allurion VCS is comprised of tools to support patients’ weight loss experience, which we believe benefit both patients and health care providers: (A) For Allurion Program patients: Every current Allurion Program patient receives an Allurion Connected Scale ("Allurion Connected Scale") and access to our mobile app (the "App"), which integrates data from the Allurion Connected Scale to conveniently monitor weight, muscle mass, body fat, activity, sleep, and several other critical metrics.
Our ability to generate revenue and achieve cost improvements sufficient to achieve profitability will depend on the successful further development and commercialization of our products and receipt and maintenance of regulatory approvals.
Our ability to generate revenue and achieve cost improvements sufficient to achieve profitability will depend on the successful further development and commercialization of our 81 products and receipt and maintenance of regulatory approvals.
We may be unable to increase our revenue, raise additional funds or enter into such other agreements or arrangements when needed on 83 favorable terms, or at all.
We may be unable to increase our revenue, raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all.
The discussion and analysis should be read together with the consolidated financial statements as of and for the years ended December 31, 2023 and December 31, 2022, included in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
The discussion and analysis should be read together with the consolidated financial statements as of and for the years ended December 31, 2024 and December 31, 2023, included in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
Revenue is generated primarily from the sale of our gastric balloon system, which includes the Allurion Balloon and related accessories. In 2023, we have provided customers purchasing the Allurion Balloon with an implied license for access to our Allurion VCS software.
Revenue is generated primarily from the sale of our gastric balloon system, which includes the Allurion Balloon and related accessories. We have provided customers purchasing the Allurion Balloon with an implied license for access to our Allurion VCS software.
Because of the numerous risks and uncertainties associated with regulatory approval, market acceptance of our product, product development and enhancement, and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.
Because of the numerous risks and uncertainties associated with obtaining and maintaining regulatory approval, market acceptance of our products, product development and enhancement, and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.
If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates and other strategic initiatives.
If we fail to increase our revenue, raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue our operations or the development and commercialization of one or more of our product candidates and other strategic initiatives.
We expect to continue to generate significant operating losses for the foreseeable future.
We expect to continue to generate operating losses for the foreseeable future.
We intend to continue to make significant investments in our sales and marketing organization to improve and increase performance, and expand our international programs to help facilitate further adoption of our products as well as broaden awareness of our products to new customers. • Product and geographic mix; timing.
We intend to continue to improve and increase performance in our sales and marketing organization, and expand our international programs to help facilitate further adoption of our products as well as broaden awareness of our products to new customers. • Product and geographic mix; timing.
We expect sales and 81 marketing costs to decrease in 2024 as we have implemented cost reduction initiatives, including a reduction in force, and shift our focus of selling and marketing spend on more efficient channels and geographies.
We expect sales and marketing costs to decrease in 2025 as we have implemented cost reduction initiatives, including a reduction in force, and shift our focus of selling and marketing spend on more efficient channels and geographies.
Pursuant to the Purchase Agreement, we have the right from time to time at our option to sell to Chardan up to the lesser of (i) $100,000,000 in aggregate gross purchase price of newly issued shares of our Common Stock, and (ii) the Exchange Cap.
Pursuant to the ChEF Purchase Agreement, we have the right from time to time at our option to sell to Chardan up to the lesser of (i) $100,000,000 in aggregate gross purchase price of newly issued shares of our common stock, and (ii) the Exchange Cap, subject to certain conditions.
We expect to continue to incur net losses as we focus on obtaining regulatory approvals for our products in new markets, refining our sales and marketing strategies, and continuing research and development efforts to further enhance our existing 74 products.
We expect to continue to incur net losses for the foreseeable future as we focus on obtaining regulatory approvals for our products in new markets, refining our sales and marketing strategies, and continuing research and development efforts to further enhance our existing products.
Change in Fair Value of Revenue Interest Financing and PIPE Conversion Option The change in fair value of Revenue Interest Financing and PIPE Conversion Option consists of the expense recognized upon the mark to market of the Revenue Interest Financing with RTW and the issuance and mark to market of the PIPE Conversion Option.
Change in Fair Value of Revenue Interest Financing and PIPE Conversion Option The change in fair value of Revenue Interest Financing and PIPE Conversion Option (as defined below) consists of the expense recognized upon the mark to market of the Revenue Interest Financing with RTW and the issuance and mark to market of the PIPE Conversion Option.
To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible. Ite m 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk We had cash and cash equivalents totaling $38.0 million as of December 31, 2023.
To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible. Ite m 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk We had cash and cash equivalents totaling $15.4 million as of December 31, 2024.
Our platform, the Allurion Program, features the world’s first and only swallowable, procedure-less intragastric balloon for weight loss and offers AI-powered remote patient monitoring tools, a proprietary behavior change program, secure messaging and video telehealth that are delivered by the Allurion Virtual Care Suite, ("VCS").
Our platform, the Allurion Program (the "Allurion Program"), features the world’s first and only swallowable, Procedureless TM intragastric balloon for weight loss (the "Allurion Balloon") and offers artificial intelligence ("AI")-powered remote patient monitoring tools, a proprietary behavior change program, secure messaging and video telehealth that are delivered by the Allurion Virtual Care Suite ("VCS").
The App can also enable secure messaging and video telehealth with the patient’s care team and can deliver content from Allurion’s proprietary behavior change program—a library of 100 weight loss actions related to diet, nutrition, mental health, sleep, goal setting, and a number of other topics—directly to the patient. The App is available in over 15 languages.
The App can also enable secure messaging and video telehealth with the patient’s care team and can deliver content from Allurion’s proprietary behavior change program - and library of 100 weight loss actions related to diet, nutrition, exercise, mental health, sleep, goal setting, and a number of other topics - directly to the patient.
Net Cash Used in Investing Activities Years Ended December 31, 2023 and 2022 During the years ended December 31, 2023 and December 31, 2022, cash used in investing activities was $1.6 million, consisting of purchases of property and equipment. 86 Net Cash Provided by Financing Activities Years Ended December 31, 2023 and 2022 During the year ended December 31, 2023, cash provided by financing activities was $96.0 million, consisting of $61.7 million of proceeds from the Business Combination, net of transaction costs, $57.6 million from the issuance of our Fortress Term Loan net of debt issuance costs, $38.8 million from the issuance of our Revenue Interest Financing Agreement with RTW net of issuance costs, and $28.7 million from the issuance of our 2023 Convertible Notes, net of issuance costs, partially offset by the $57.7 million repayment of our 2021 Term Loan, $20.0 million repayment of our Fortress Term Loan, $10.8 million repayment of our 2023 Convertible Notes and $2.5 million repayment of a promissory note assumed from Compute Health in the Business Combination.
During the year ended December 31, 2023, cash provided by financing activities was $96.0 million, consisting of $61.7 million of proceeds from the Business Combination, net of transaction costs, $57.6 million from the issuance of our Fortress Term Loan net of debt issuance costs, $38.8 million from the issuance of our Revenue Interest Financing Agreement with RTW net of issuance costs, and $28.7 million from the issuance of our 2023 Convertible Notes, net of issuance costs, partially offset by 91 the $57.7 million repayment of our 2021 Term Loan, $20.0 million repayment of our Fortress Term Loan, $10.8 million repayment of our 2023 Convertible Notes, and $2.5 million repayment of a promissory note assumed from Compute Health in the Business Combination.
Further, following the closing of the Business Combination described below in “Recent Developments,” we have incurred, and expect to continue to incur, additional costs associated with operating as a public company. As a result, we will need substantial additional funding for expenses related to our operating activities, including selling, marketing, general and administrative expenses and research and development expenses.
Further, following the closing of the Business Combination, we have incurred, and expect to continue to incur, additional costs associated with operating as a public company. As a result, we will need additional funding for expenses related to our operating activities, including selling, marketing, general and administrative, and research and development expenses.
During year ended December 31, 2022, the effect of an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts would have had an impact of approximately 4% on revenues and 2% on expenses and would have impacted our net loss by approximately 1%. 90 Ite m 8. Financial Statements and Supplementary Data.
During year ended December 31, 2023, the effect of an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts would have had an impact of approximately 5% on revenues and 2% on expenses and would have impacted our net loss by less than 1%. 94 Ite m 8. Financial Statements and Supplementary Data.
Liquidity and Capital Resources Since our inception, we have primarily obtained cash to fund our operations through the sale of preferred stock, issuance of term loans and issuance of convertible debt instruments. As of December 31, 2023, we had $38.0 million in cash and cash equivalents.
Liquidity and Capital Resources Since our inception, we have primarily obtained cash to fund our operations through the sale of common stock and preferred stock, issuance of term loans, and issuance of convertible debt instruments. As of December 31, 2024, we had $15.4 million in cash and cash equivalents.
The decrease in revenue was also attributable to selling less or no product to certain distributors and accounts to manage our credit risk. Cost of Revenue Cost of revenue decreased $1.5 million, or 11%, to $12.0 million for the year ended December 31, 2023, compared to the same period in 2022.
The decrease in revenue was also attributable to selling less or no product to certain distributors and accounts to manage our credit risk. Cost of Revenue Cost of revenue decreased $1.4 million, or 11%, to $10.6 million for the year ended December 31, 2024, compared to the same period in 2023.
If our current cash and anticipated revenue and resulting cash flows from operations are insufficient to satisfy our liquidity and debt service requirements as well as our minimum liquidity and revenue covenants in our debt arrangements, including because of increased expenditures, lower demand for our gastric balloon system, the occurrence of other events or the realization of the risks described in this Annual Report on Form 10-K, we may be required to raise additional capital through the issuances of public or private equity or debt financing or other capital sources earlier than expected.
If our current cash and anticipated revenue and resulting cash flows from operations are insufficient to satisfy our liquidity requirements, due to increased expenditures, lower demand for or sales of our gastric balloon system, the occurrence of other events, or the realization of the risks described in this Annual Report on Form 10-K under the heading "Risk Factors," we may be required to raise additional capital through the issuances of public or private equity or debt financing or other capital sources earlier than expected.
Until such time as we can generate significant revenue to fund operations, we expect to use proceeds from the issuance of equity, debt financings, or other capital transactions to fund our operations and satisfy our liquidity requirements.
Until such time as we can generate sufficient revenue to fund operations, we expect to use proceeds from the issuance of equity, debt financings, or other capital transactions to fund our operations and satisfy our liquidity requirements, but the amount and timing of such financings are uncertain.
During the year ended December 31, 2023, the effect of an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts would have had an impact of approximately 5% on revenues and 2% on expenses and would have impacted our net loss by less than 1%.
During the year ended December 31, 2024, the effect of an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts would have had an impact of approximately 6% on revenues and 3% on expenses and would have impacted our net loss by 2%.
As our international operations grow, we will continue to reassess our approach to managing the risks relating to fluctuations in foreign currency exchange rates.
As we continue to do business internationally, and should our international operations grow, we will continue to reassess our approach to managing the risks relating to fluctuations in foreign currency exchange rates.
Financing Arrangements Chardan Purchase Agreement On December 18, 2023 we entered into the Purchase Agreement with Chardan.
Chardan Purchase Agreement On December 18, 2023, we entered into the ChEF Purchase Agreement with Chardan.
Based on our recurring losses from operations incurred since inception, its expectation of continuing operating losses for the foreseeable future, the potential need to raise additional capital to finance its future operations and debt service payments, and the potential of being unable to remain in compliance with certain financial covenants we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that these consolidated financial statements are issued.
Based on our recurring losses from operations incurred since inception, the expectation of continuing operating losses for the foreseeable future, and the potential need to raise additional capital to finance our future operations and debt service payments, we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that the consolidated financial statements included in this Annual Report on Form 10-K are issued.
In December 2023, we repaid $20.0 million of outstanding principal under the Fortress Term Loan. Revenue Interest Financing We received $40.0 million in proceeds from the Revenue Interest Financing Agreement with RTW.
In December 2023, we repaid $20.0 million of outstanding principal under the Fortress Term Loan. In April 2024, we repaid the Fortress term Loan in full with the proceeds of the Notes. Revenue Interest Financing In connection with the closing of the Business Combination, we received $40.0 million in proceeds from the Revenue Interest Financing Agreement with RTW.
In exchange for the Investment Amount, Allurion will remit revenue interest payments on all current and future products, digital solutions and services developed, imported, manufactured, marketed, offered for sale, promoted, sold, tested or otherwise distributed by Allurion and its subsidiaries.
In exchange, we are obligated to remit to RTW certain revenue interest payments on all current and future products, digital solutions and services developed, imported, manufactured, marketed, offered for sale, promoted, sold, tested or otherwise distributed by Allurion and its subsidiaries.
If RTW has not received revenue interest payments equal to at least 240% of the Investment Amount by December 31, 2030, we must make a cash payment in an amount sufficient to catch RTW up to 240% of the Investment Amount. Research and Development Costs We are continuing to invest in our U.S.
If RTW has not received revenue interest payments equal to at least 240% of the Investment Amount by December 31, 2030, we must make a cash payment in an amount sufficient to catch RTW up to 240% of the Investment Amount.
Net cash used by changes in our operating assets and liabilities consisted of a $22.8 million increase in accounts receivable, a $1.2 million increase in inventory, a $0.7 million decrease in operating lease liabilities and a $0.6 million increase in prepaid expenses, other current assets and long-term assets, partially offset by a net $11.5 million increase in accounts payable, accrued expenses and other current liabilities.
Net cash provided by changes in our operating assets and liabilities consisted of a $9.0 million decrease in accounts receivable, a $0.9 million decrease in prepaid expenses, other current and long-term assets, and a $0.5 million decrease in inventory, partially offset by a net $8.0 million decrease in accounts payable, accrued expenses and other current liabilities and a $0.8 million decrease in our lease liabilities.
See Note 9, Revenue Interest Financing, Side Letter, and PIPE Conversion Option in the notes to our annual consolidated financial statements for the years ended December 31, 2023 and 2022 included within this Annual Report on Form 10-K for additional details regarding the Revenue Interest Financing Agreement.
See Note 9, Revenue Interest Financing, Side Letter, and PIPE Conversion Option in the notes to our annual consolidated financial statements for the years ended December 31, 2024 and 2023 for additional details regarding the Revenue Interest Financing Agreement.
(B) For Allurion Program providers: Allurion Insights provides end-to-end remote patient monitoring powered by the Allurion Iris AI platform, which leverages machine learning to deliver key insights related to patient tracking data.
The App is available in 15 languages. (B) For Allurion Program providers: Our clinic dashboard, Allurion Insights, provides end-to-end remote patient monitoring powered by the Allurion Iris AI platform, which leverages machine learning to deliver key insights related to patient tracking data.
Loss on Extinguishment of Debt The loss on extinguishment of debt consists of the expense recognized related to the extinguishment of our 2021 Term Loan (as defined herein).
Loss on Extinguishment of Debt The loss on extinguishment of debt consists of the expense recognized related to the extinguishment of our 2021 Term Loan and Fortress Term Loan.
Change in Fair Value of Earn-out Liabilities The change in fair value of earn-out liabilities consists of the gain or loss recognized upon the mark to market of the contingent earn-out consideration.
See Note 10, Fair Value Measurements for further information. Change in Fair Value of Earn-out Liabilities The change in fair value of earn-out liabilities consists of the gain or loss recognized upon the mark to market of the contingent earn-out consideration. See Note 10, Fair Value Measurements for further information.
In connection with entering in the Revenue Interest Financing, we and RTW entered into the RTW Side Letter under which RTW may elect to convert up to $7.5 million of its initial PIPE subscription into an additional revenue interest financing by forfeiting a number of shares of our common stock acquired by RTW in its PIPE Investment.
In connection with entering in the Revenue Interest Financing, we and RTW entered into the RTW Side Letter (as subsequently amended and restated) under which RTW was entitled to convert up to $7.5 million of its initial PIPE subscription into an additional revenue interest financing by forfeiting a number of shares of our common stock acquired by RTW in its PIPE Investment (the "PIPE Conversion Option"), which election was made in October 2024.
We generated revenue of $53.5 million and $64.2 million for the years ended December 31, 2023 and 2022, respectively, and incurred net losses of $80.6 million and $37.7 million for those same periods.
We generated revenue of $32.1 million and $53.5 million for the years ended December 31, 2024 and 2023, respectively, and incurred net losses of $26.1 million and $80.6 million for those same periods, respectively.
The Revenue Interest Financing Agreement is included in Revenue Interest Financing liability on our consolidated balance sheet as of December 31, 2023.
The Revenue Interest Financing Agreement, as subsequently amended by the Omnibus Amendment, is included in Revenue Interest Financing liability on our consolidated balance sheet as of December 31, 2024.
Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies in the accompanying notes to our annual consolidated financial statements for the years ended December 31, 2023 and 2022 included in this Annual Report on Form 10-K for a description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows.
Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies in the accompanying notes to our annual consolidated financial statements for the years ended December 31, 2024 and 2023 included in this Annual Report on Form 10-K for a description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows. 93 Emerging Growth Company and Smaller Reporting Company We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”).
Transaction gains or losses are included in other income (expense), net in the consolidated statements of operations, as incurred. We believe that a 10% increase or decrease in current exchange rates between the U.S. dollar and our foreign currencies could have a material impact on our business, financial condition or results of operations.
We believe that a 10% increase or decrease in current exchange rates between the U.S. dollar and our foreign currencies could have a material impact on our business, financial condition or results of operations.
Operating Expenses Sales and Marketing Expenses Sales and marketing expenses decreased $3.5 million, or 7%, to $46.9 million for the year ended December 31, 2023, compared to the same period in 2022.
Operating Expenses Sales and Marketing Expenses Sales and marketing expenses decreased $20.9 million, or 45%, to $25.9 million for the year ended December 31, 2024, compared to the same period in 2023.
We incurred net losses of $80.6 million and $37.7 million for the years ended December 31, 2023 and 2022, respectively. We incurred cash outflows from operating activities of $64.0 million and $47.0 million during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $212.8 million.
We incurred net losses of $26.1 million and $80.6 million for the years ended December 31, 2024 and 2023, respectively. We incurred cash outflows from operating activities of $42.3 million and $64.0 million during the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $238.9 million.
During the year ended December 31, 2022, operating activities used $47.0 million of cash, resulting from a net loss of $37.7 million and net cash used by changes in our operating assets and liabilities of $13.8 million, offset by non-cash charges of $4.6 million.
During the year ended December 31, 2023, operating activities used $64.0 million of cash, resulting from a net loss of $80.6 million, partially offset by net cash provided by changes in our operating assets and liabilities of $0.2 million and non-cash charges of $16.4 million.
This was partially offset by $1.2 million of interest income during the period. Provision for Income Taxes We recorded a provision for income taxes of $0.3 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively. These provisions for income taxes are due to net income in certain foreign jurisdictions.
Provision for Income Taxes We recorded a provision for income taxes of $0.7 million and $0.3 million for the years ended December 31, 2024 and 2023, respectively. These provisions for income taxes are due to net income in certain foreign jurisdictions.
Cash Flows The following table sets forth a summary of cash flows for the periods presented: Years Ended December 31, (In thousands) 2023 2022 Net cash used in operating activities $ (63,982 ) $ (46,981 ) Net cash used in investing activities (1,606 ) (1,550 ) Net cash provided by financing activities 95,986 30,537 Net increase (decrease) in cash and cash equivalents, and restricted cash $ 30,398 $ (17,994 ) 85 Net Cash Used in Operating Activities Years Ended December 31, 2023 and 2022 During the year ended December 31, 2023, operating activities used $64.0 million of cash, resulting from a net loss of $80.6 million, partially offset by net cash provided by changes in our operating assets and liabilities of $0.2 million and non-cash charges of $16.4 million.
Cash Flows The following table sets forth a summary of cash flows for the periods presented: Years Ended December 31, (In thousands) 2024 2023 Net cash used in operating activities $ (42,300 ) $ (63,982 ) Net cash used in investing activities (611 ) (1,606 ) Net cash provided by financing activities 20,208 95,986 Net increase (decrease) in cash and cash equivalents, and restricted cash $ (22,703 ) $ 30,398 Net Cash Used in Operating Activities Years Ended December 31, 2024 and 2023 During the year ended December 31, 2024, operating activities used $42.3 million of cash, resulting from a net loss of $26.1 million and non-cash income of $17.8 million, partially offset by net cash provided by changes in our operating assets and liabilities of $1.6 million.
For example, in June 2022, we incorporated a Treatment Tracking and Clinic-Led Onboarding feature into the Allurion VCS, which enables seamless onboarding and management of patients undergoing one or multiple weight loss treatments, including gastric balloons such as the Allurion Balloon, surgery, or medications.
We have incorporated a Treatment Tracking and Clinic-Led Onboarding feature into the VCS that enables seamless onboarding and management of patients undergoing one or multiple weight loss treatments, including gastric balloons such as the Allurion Balloon, surgery, or medication, and in April 2024, launched the VCS in the United States for patients utilizing other weight loss treatments, including anti-obesity medications and bariatric surgery.
General and administrative expenses also include legal fees relating to corporate matters; professional fees paid for accounting, auditing, consulting and tax services; insurance costs; travel expenses; office and information technology costs; and facilities, depreciation and other expenses related to general and administrative activities, which include direct or allocated expenses for rent and maintenance of facilities and utilities. 79 Other Income (Expense) Interest Expense Interest expense consists of interest expense associated with outstanding borrowings under our debt obligations as well as the amortization of debt issuance costs and discounts associated with such borrowings.
General and administrative expenses also include legal fees relating to corporate matters; professional fees paid for accounting, auditing, consulting and tax services; insurance costs; travel expenses; office and information technology costs; and facilities, depreciation and other expenses related to general and administrative activities, which include direct or allocated expenses for rent and maintenance of facilities and utilities .
Termination of convertible note side letters The termination of convertible note side letters consists of the expense recognized related to the convertible note prepayment penalty and recognition of the PubCo Additional Shares liability and Base PubCo Shares and Backstop Shares liability and subsequent changes in fair value.
Termination of convertible note side letters The termination of convertible note side letters consists of the expense recognized related to the convertible note prepayment penalty and recognition of the PubCo Share, Base PubCo Share and Backstop Share liabilities .
Research and Development Expenses Research and development expenses increased $10.7 million, or 63%, to $27.7 million for the year ended December 31, 2023, compared to the same period in 2022.
Research and Development Expenses Research and development expenses decreased $10.3 million, or 37%, to $17.4 million for the year ended December 31, 2024, compared to the same period in 2023.
Changes in the estimated fair value of the continent earn-out consideration may materially impact or cause volatility in our operating results. Valuation of Revenue Interest Financing and PIPE Conversion Option In connection with the Business Combination, we entered into the Revenue Interest Financing Agreement RTW, under which we received $40.0 million upfront.
Valuation of Revenue Interest Financing and PIPE Conversion Option In connection with the Business Combination, we entered into the Revenue Interest Financing Agreement with RTW, under which we received $40.0 million upfront.
Emerging Growth Company and Smaller Reporting Company We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
On August 1, 2023, concurrent with the closing of the Business Combination, we used $58.0 million of borrowings under the Fortress Term Loan to repay all outstanding principal, accrued and unpaid interest and other obligations with respect to the 2021 Term Loan, which has been terminated.
See Note 16, Commitments and Contingencies in the notes to our annual consolidated financial statements for the years ended December 31, 2024 and 2023 for additional details related to our non-cancelable operating leases. 89 Term Loan On August 1, 2023, concurrent with the closing of the Business Combination, we used $58.0 million of borrowings under the Fortress Term Loan to repay all outstanding principal, accrued and unpaid interest and other obligations with respect to the 2021 Term Loan, which has been terminated.
Change in Fair Value of Revenue Interest Financing and PIPE Conversion Option The $2.2 million loss attributable to the change in fair value of Revenue Interest Financing and PIPE conversion option for the year ended December 31, 2023 was primarily due to the initial recognition of the PIPE Conversion Option of $3.3 million on August 1, 2023 and an additional $2.3 million loss in the fair value from August 1, 2023 to December 31, 2023 due to a decrease in the Company's stock price during that period.
Change in Fair Value of Revenue Interest Financing and PIPE Conversion Option The $14.3 million loss attributable to the change in fair value of the Revenue Interest Financing and PIPE Conversion Option for the year ended December 31, 2024, compared to the same period in 2023, was primarily due to a $13.1 million loss related to the change in fair value of the Revenue Interest Financing and a $1.8 million loss on PIPE Conversion Option primarily driven by a decrease in the discount rate.
In particular, the fair value estimate was sensitive to certain assumptions, such as the volatility of underlying shares. Changes in the estimated fair value of the contingent earn-out consideration are recorded in Other (expense) income in the consolidated statements of operations and are reflected in the period in which they are identified.
Changes in the estimated fair value of the contingent earn-out consideration are recorded in Other (expense) income in the consolidated statements of operations and are reflected in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact or cause volatility in our operating results.
Payments due upon cancellation typically consist only of payments for services provided or expenses incurred, including non-cancelable obligations of service providers, up to the date of cancellation.
Other Capital Requirements We enter into agreements in the normal course of business with various vendors, which are generally cancelable upon notice. Payments due upon cancellation typically consist only of payments for services provided or expenses incurred, including non-cancelable obligations of service providers, up to the date of cancellation.
These risks include transaction gains and losses associated with transactions denominated in currencies other than a location’s functional currency and the remeasurement of foreign currencies to our U.S. dollar reporting currency. As such, we have exposure to adverse changes in exchange rates associated with operating expenses of our foreign operations.
As of December 31, 2024 we had no variable rate debt outstanding. Foreign Currency Exchange Risk We are exposed to foreign currency risks that arise from normal business operations. These risks include transaction gains and losses associated with transactions denominated in currencies other than a location’s functional currency and the remeasurement of foreign currencies to our U.S. dollar reporting currency.
Payments to the customer for a distinct good or service that reasonably estimates the fair value of the distinct benefit received, such as marketing programs and shipping and logistics services, are recorded as a selling and marketing expense. 87 Our payment terms are consistent with prevailing practice in the respective markets in which we do business, which are not affected by contingent events that could impact the transaction price.
Any discounts we offer are outlined in our customer agreements. Payments to the customer for a distinct good or service that reasonably estimates the fair value of the distinct benefit received, such as marketing programs and shipping and logistics services, are recorded as a selling and marketing expense.
“Legacy Allurion” refers to Allurion Technologies, LLC, which was previously known as Allurion Technologies Opco, Inc. (formerly Allurion Technologies, Inc.) prior to the consummation of the Business Combination. Overview Allurion is a leading medical device company that is focused on creating a best-in-class weight loss platform to treat obese and overweight patients.
Overview Allurion is a leading medical device company that is focused on creating a best-in-class weight loss platform to treat obese and overweight patients.
The increase in research and development expenses was the result of an increase of $9.8 million in costs related to the AUDACITY clinical trial, and a $0.9 million increase attributable to salaries due to higher headcount to support new product development and clinical trials. We expect research and development expenses to decrease in 2024 as our AUDACITY trial nears completion.
The decrease in research and development expenses was the result of a decrease of $6.3 million in costs related to the AUDACITY clinical trial as it nears completion, a $2.9 million decrease attributable to salaries and related benefit costs due to lower headcount, and a $1.2 million decrease in outside consulting costs.
Our proprietary intragastric balloon, the Allurion Balloon, is swallowed as a capsule under the guidance of a health care provider without surgery, endoscopy, or anesthesia.
We believe the Allurion Program is also synergistic in combination with other weight loss therapies, including glucagon-like peptide 1 ("GLP-1") receptor agonists. Our proprietary intragastric balloon, the Allurion Balloon, is swallowed as a capsule under the guidance of a health care provider without surgery, endoscopy, or anesthesia.
Other (Expense) Income, Net The change in Other (expense) income, net for the year ended December 31, 2023 compared to the same period in 2022 was $0.3 million of expense, primarily driven by interest expense of $1.7 million due to the establishment of the Fortress Term Loan derivative liability and mark to market fluctuations of the 2019 Term Loan Success Fee derivative liability.
Other Income (Expense), Net The change in Other income (expense), net for the year ended December 31, 2024 compared to the same period in 2023 was a gain of $2.1 million, primarily driven by the $2.0 million write-off of the term loan derivative liability to zero in connection with the termination of the Fortress Term Loan and a $1.4 million gain in interest income, partially offset by a $1.1 million loss related to the Amended Note Purchase Agreement.
The decrease in revenue was primarily the result of a delay in closing of the Business Combination, which led to decreased investment in certain markets, leading to temporarily lower re-order rates as distributors and certain accounts adjusted their inventory levels during the second half of 2023.
The decrease in revenue was the result of lower re-order rates as distributors and certain accounts adjusted their inventory levels, as well as macroeconomic headwinds in certain markets.
This expense was partially offset by a $3.4 million gain in the fair value in the Revenue Interest Financing from when the liability was established on August 1, 2023 to December 31, 2023. 82 Change in Fair Value of Earn-Out Liabilities The $29.1 million gain attributable to the change in the fair value of earn-out liabilities for the year ended December 31, 2023 was due to the decrease in our stock price between the establishment of the liability on August 1, 2023 and December 31, 2023.
Change in Fair Value of Earn-Out Liabilities The $22.9 million gain attributable to the change in the fair value of earn-out liabilities for the year ended December 31, 2024 was due to the decrease in our stock price from December 31, 2023 to December 31, 2024.
As of March 15, 2024, we have received $0.3 million in net proceeds from sales of shares of our Common Stock pursuant to the Purchase Agreement with Chardan. Fortress Credit Agreement As of December 31, 2023, we have received $57.6 million in net proceeds from the Fortress Term Loan which matures in June 2027.
As of December 31, 2024, we have received $1.0 million in net proceeds from the sale of an aggregate 75,461 shares of our common stock pursuant to the ChEF Purchase Agreement with Chardan. Revenue Interest Financing Agreement On August 1, 2023, we received $40.0 million in proceeds from the Revenue Interest Financing Agreement with RTW, which matures in December 2030.
We must successfully obtain timely approvals and introduce new products that gain acceptance with health care providers.
We must successfully obtain timely approvals, maintain regulatory approval, successfully implement any remediation programs required by regulators to resume sales of the Allurion Balloon, and introduce new products that gain acceptance with health care providers.
The decrease in lease liabilities was primarily due to payment of rent for our leased property. The net increase in accounts payable, accrued expenses and other current liabilities was primarily related to an increase in sales and marketing and general and administrative expenses.
The net decrease in accounts payable, accrued expenses and other current liabilities was primarily related to decreased expenses and timing of payments.
See Note 8, Debt in the notes to our annual consolidated financial statements for the years ended December 31, 2023 and 2022 for additional details regarding the 2021 Term Loan.
As of December 31, 2024, $48.0 million of the Notes remains outstanding and is included in convertible notes payable, net of discounts on our consolidated balance sheets. See Note 8, Debt , in the notes to our annual consolidated financial statements for the years ended December 31, 2024 and 2023 for additional details related to the Notes.
Loss on Extinguishment of Debt The $3.9 million loss on extinguishment of debt for the year ended December 31, 2023 was due to the loss on extinguishment of debt related to the repayment of our 2021 Term Loan in connection with the entrance into the Fortress Term Loan on August 1, 2023.
This increase was due to the $8.7 million loss on extinguishment of our Fortress Term Loan in April 2024, compared to the $3.9 million loss on the extinguishment of our 2021 Term Loan in August 2023.
Change in Fair Value of Warrants The change in fair value of warrants for the year ended December 31, 2023 compared to the same period in 2022 was a gain of $9.2 million, primarily driven by a $7.8 million gain attributable to the change in fair value of the CPUH public warrants and a $0.5 million gain attributable to the change in fair value of our private warrants due to the decline in value of our common and preferred stock during those periods.
Change in Fair Value of Warrants The $17.0 million gain attributable to the change in fair value of warrants for the year ended December 31, 2024, compared to the same period in 2023, was due to mark to market fluctuations in our warrant liabilities due to the decline in value of our common stock during the periods, as well as the issuance of the July 2024 Public Offering Warrants and July 2024 Private Placement Warrants on July 1, 2024, for which there were no comparable mark to market fluctuations in the prior period.
During the year ended December 31, 2022, cash provided by financing activities was $30.5 million, consisting of $29.6 million from the issuance of our 2021 Term Loan, net of issuance costs, $1.1 million from the issuance of our 2022 Convertible Notes, net of issuance costs and $0.1 million from the exercise of stock options, partially offset by $0.3 million payment of deferred financing costs.
Net Cash Provided by Financing Activities Years Ended December 31, 2024 and 2023 During the year ended December 31, 2024, cash provided by financing activities was $20.2 million, consisting of $48.0 million in proceeds from the issuance of convertible notes, $17.7 million in net proceeds from the July 2024 Public Offering, $2.6 million in net proceeds from the July 2024 Private Placement, and $1.0 million of proceeds from our equity line financing, partially offset by $47.7 million repayment of the Fortress Term Loan and a $1.4 million payment of debt issuance costs.
Change in Fair Value of Debt The $3.8 million loss attributable to the change in fair value of debt for the year ended December 31, 2023 was driven by mark to market fluctuations in our convertible debt as a result of the closing of the Business Combination and automatic conversion of the notes to Common Stock.
Change in Fair Value of Deb t The $8.7 million gain attributable to the change in fair value of debt for the year ended December 31, 2024, compared to the same period in 2023, was due to mark to market fluctuations in our convertible debt.
The increase in accounts receivable was primarily related to growth in sales. The increase in prepaid expenses and other current assets was primarily related to increases in prepaid inventory and additional software subscription costs. The increase in inventory was primarily related to an increase in finished goods and raw materials.
The decrease in accounts receivable was the result of an increase in cash collections and decrease in revenue. The decrease in inventory was primarily related to a decrease in finished goods and work in progress. The decrease in prepaid expenses, other current and long-term assets was primarily related to a decrease in prepaid inventory and payroll deposits.
Our contracts with customers do not provide general rights of return unless certain product quality standards are not met.
Our payment terms are consistent with prevailing practice in the respective markets in which we do business, which are not affected by contingent events that could impact the transaction price. Our contracts with customers do not provide general rights of return unless certain product quality standards are not met.

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