Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis includes information that our management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The discussion and analysis should be read together with the unaudited consolidated financial statements as of and for the three months ended March 31, 2026 and March 31, 2025 included in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements as of and for the years ended December 31, 2025 and December 31, 2024 that are included in our Annual Report on Form 10-K filed with the SEC on March 30, 2026 (the "Annual Report on Form 10-K"). This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the sections titled "Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors" in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q. For purposes of this section, all references in this discussion and analysis to "Allurion," the "Company", "we," "us," or "our" refers to the business and operations of Allurion and its consolidated subsidiaries following the consummation of the Business Combination and to Legacy Allurion and its consolidated subsidiaries prior to the consummation of the Business Combination. "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. Capitalized terms not defined in this Management's Discussion and Analysis of Financial Condition and Results of Operations section have the meanings ascribed to them in the condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.

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. Our platform, the Allurion Program (the "Allurion Program"), features the world's first and only swallowable, Procedureless™ intragastric balloon for weight loss (the "Allurion Smart Capsule") 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 Allurion Program was designed to achieve metabolically healthy weight loss, which entails losing weight, maintaining that weight loss, and maintaining or increasing muscle mass in the process. Unlike other options that lead to short-term weight loss and muscle wasting, the Allurion Program is intended to deliver longer lasting results while reducing fat and not muscle. 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 Smart Capsule, is swallowed as a capsule under the guidance of a health care provider without surgery, endoscopy, or anesthesia for placement.

The Allurion VCS is comprised of tools to support patients' weight loss experience, which we believe benefit both patients and health care providers:

In addition to its use by Allurion Smart Capsule 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. 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.

Our Allurion Program products are currently sold in the United States, Europe, the Middle East, Africa, Latin America, Canada and the Asia-Pacific region.

Since our inception, we have incurred significant operating losses. 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. We generated revenue of $2.9 million and $5.6 million for the three months ended March 31, 2026 and 2025, respectively, and incurred losses from operations of $3.7 million and $7.3 million for those same periods, respectively. We expect to continue to incur operating 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. 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.

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. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through a combination of equity offerings and debt financings. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we are unable to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations. See the subsection entitled - "Liquidity and Capital Resources" below.

Recent Developments

FDA Approval

On February 20, 2026, the U.S. Food and Drug Administration ("FDA") granted PMA approval for the Allurion Gastric Balloon System (AGBS), featuring the Allurion Smart Capsule. In the United States, the AGBS is indicated to promote short-term limited weight loss in adult individuals with obesity between the ages of 22 years and 65 years with a body mass index (BMI) ≥ 30 kg/m2 and ≤ 40 kg/m2 who have had at least one unsuccessful attempt at a weight loss program. The residence time for each balloon is variable with an average observed residence time of 15.3 weeks. The AGBS is to be used in conjunction with a moderate intensity lifestyle modification therapy program. The AGBS consists of up to two Allurion Balloons placed during a 10-month period.

Warrant Inducement

On February 24, 2026, Allurion Technologies, Inc. (the "Company") entered into a warrant exercise inducement offer letter (the "Inducement Letter") with certain holders (the "Exercising Holders") of certain of the Company's: (i) warrants issued in January 2025 to purchase shares of common stock, par value $0.0001 per share ("Common Stock"), with an exercise price of $6.00 per share (the "January 2025 Warrants"); (ii) warrants issued in February 2025 to purchase shares of Common Stock with an exercise price of $5.23 per share (the "February 2025 Warrants"); and (iii) warrants issued in November 2025 to purchase shares of Common Stock with an exercise price of $1.67 per share (the "November 2025 Warrants" and together with the January 2025 Warrants, February 2025 Warrants, the "Existing Warrants").

Pursuant to the terms of the Inducement Letter, the Company agreed to amend the Existing Warrants by lowering the exercise price of the Existing Warrants to $1.15 per share. Additionally, the Exercising Holders agreed to exercise for cash certain of their Existing Warrants to purchase an aggregate of 2,659,565 shares of Common Stock in exchange for the Company's agreement to issue to such Exercising Holder new warrants (the "New Warrants") to purchase up to an aggregate of 5,319,130 shares of Common Stock. The Company received aggregate gross proceeds of approximately $3.1 million from the exercise of the Existing Warrants by the Exercising Holders.

Each New Warrant is exercisable into shares of Common Stock at a price per share of $1.15, will initially be exercisable following stockholder approval (the "Initial Exercise Date"), and will expire on the five-year anniversary of the Initial Exercise Date. Subject to limited exceptions, a holder of New Warrants will not have the right to exercise any portion of its New Warrants if the holder (together with such holder's affiliates, and any persons acting as a group together with such holder or any of such holder's affiliates) would beneficially own a number of shares of Common Stock in excess of 4.99% (or 9.99% at the Existing Holders' option).

The Company has engaged Roth Capital Partners, LLC ("Roth") as its financial advisor in connection with these transactions and will pay Roth a fee equal to 5.0% of its gross proceeds from the exercise of the Existing Warrants. The Company also agreed to pay Roth up to $40,000 for fees and expenses of legal counsel and other out-of-pocket expenses.

NYSE Continued Listing Standards

On March 2, 2026, Company announced that it received a letter (the "Delisting Notice") from the staff of the NYSE indicating that the Company does not meet certain of the NYSE's continued listing standards as set forth in the Minimum Market Capitalization Standard.

On March 6, 2026, the NYSE subsequently informed the Company that it has determined to commence proceedings to delist the Company's Common Stock, and warrants to purchase 0.056818 shares of Common Stock, with an exercise price of $202.50 per share of Common Stock, as a result of the Company's non-compliance with Rule 802.01B of the NYSE Listed Company Manual that requires listing companies to maintain an average global market capitalization of at least $15 million over a period of 30 consecutive trading days. Trading in the Common Stock on the NYSE was suspended after market close on March 6, 2026. The Company has appealed this delisting determination. If the Company is unsuccessful in its appeal, the Company expects the NYSE will file a Form 25 with the SEC, which would result in the delisting of the Company's Common Stock and Warrants from the NYSE on the tenth day after the Form 25 is filed.

As a result of the suspension in trading and delisting process, and pending the Company's appeal, the Common Stock is trading on the OTCQB Market. The Company may apply to list on a higher-tier market operated by the OTC Market Group, Inc. under its current symbols "ALUR" and "ALUR.WS".

Key Factors Affecting Our Operating Results

We believe that our performance and future success depend on many factors that present significant opportunities but also pose risks and challenges, including those discussed below and in the "Risk Factors" section of our Annual Report on Form 10-K.

Operating Segments

We operate our business in a single segment and as one reporting unit, which is how our chief operating decision maker ("CODM"), our chief executive officer, reviews financial performance and allocates resources. The CODM reviews financial information presented on a regular basis at the consolidated level for purposes of allocating resources and evaluating financial performance. Since we operate as one operating segment, all required financial segment information can be found in the consolidated financial statements.

Components of Our Results of Operations

Revenue

We derive revenue from the sale of the Allurion Smart Capsule to customers, which are either distributors or health care providers. The Allurion Smart Capsule is the foundation of the Allurion Program, a holistic weight loss program that offers patients the opportunity to receive, and clinic and other health care providers the ability to deliver, behavior change assistance through their use of our remote patient support and monitoring tools.

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. Marketing programs consist of advertising, training events, brand building, product marketing activities, and shipping costs.

Research and Development Expenses

Our research and development expenses consist of costs associated with performing research and development activities such as registering our products in various jurisdictions and performing clinical trials. These costs include salaries and benefits, stock-based compensation, non-capitalizable software development costs, product development costs, materials and supplies, clinical trial activities, registration expenses, depreciation of equipment, and other outside services.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, information technology, finance and accounting, human resources and other administrative functions. 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.

Other Income (Expense)

Change in Fair Value of Warrants

The change in fair value of warrants consists of the expense recognized upon the mark to market of our warrant liabilities.

Change in Fair Value of Debt

The change in fair value of debt consists of the expense recognized upon the mark to market of our convertible debt.

Change in Fair Value of Revenue Interest Financing

The change in fair value of Revenue Interest Financing consists of the expense recognized upon the mark to market of the Revenue Interest Financing with RTW. See Note 9, 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 mark to market of the contingent earn-out consideration. See Note 9, Fair Value Measurements for further information.

Warrant Inducement Expense

Warrant inducement expense consists of the gain or loss recognized upon the Warrant Inducement and issuance of Inducement Warrants. See Note 11, Capital Stock and Stockholders Deficit for further information.

Other Income, net

Other income (expense), 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 recognized upon the mark to market of the Share Obligation liability (as defined in Note 7, Debt, in the accompanying notes to the consolidated financial statements). See Note 9, Fair Value Measurements, for further information.

Results of Operations

Comparison of the Three Months Ended March 31, 2026 and 2025 (unaudited)

The following table summarizes our results of operations for the three months ended March 31, 2026 and 2025 (in thousands):

Revenue

Revenue decreased $2.6 million, or 47%, to $2.9 million for the three months ended March 31, 2026 compared to the same period in 2025. The decrease in revenue was primarily the result of lower investment in sales and marketing as we move our strategy to "business to business to customer" and away from direct to customer and distributor transitions initiated in the second quarter of 2025. The decrease was also driven by selling less or no product to certain distributors and accounts to manage our credit risk.

Cost of Revenue

Cost of revenue increased $0.3 million, or 21%, to $1.7 million for the three months ended March 31, 2026 compared to the same period in 2025. The increase in cost of revenue was a result of a $0.4 million increase and excess and obsolete inventory charges, partially offset by a decrease in cost of goods sold driven by decreased gastric balloon units sold and less labor and overhead absorbed due to lower production volumes.

Gross Profit

Gross profit decreased $2.9 million, or 70%, to $1.2 million for the three months ended March 31, 2026 compared to the same period in 2025. The decrease in gross profit was primarily the result of a $0.4 million increase in excess and obsolete inventory charges on lower sales and lower production volumes.

Operating Expenses

Sales and Marketing Expenses

Sales and marketing expenses decreased $2.3 million, or 64%, to $1.3 million for the three months ended March 31, 2026 compared to the same period in 2025. The decrease in sales and marketing expenses was primarily the result of a $1.5 million decrease in salaries and related benefits due to lower headcount as a result of the restructuring implemented during the third quarter of 2025, a

$0.3 million decrease in marketing expenditures driven by a reorganization of our selling and marketing spend focusing on more efficient channels and geographies, and a $0.2 million decrease in shipping and logistics expense.

Research and Development Expenses

Research and development expenses decreased $1.7 million, or 65%, to $0.9 million for the three months ended March 31, 2026 compared to the same period in 2025. The decrease in research and development expenses was primarily the result of a $0.8 million decrease in costs related to the AUDACITY clinical trial as the fourth and final module of the PMA was submitted to the FDA in June 2025 and we received FDA approval in February 2026, a $0.7 million decrease attributable to salaries and related benefit costs due to lower headcount as a result of the restructuring implemented during the third quarter of 2025, and a $0.1 million decrease in outside consulting costs.

General and Administrative Expenses

General and administrative expenses decreased $2.5 million, or 47%, to $2.7 million for the three months ended March 31, 2026 compared to the same period in 2025. The decrease in general and administrative expenses was primarily the result of a $1.6 million decrease in legal and professional fees, driven by $1.4 million of one-time financing costs during the three months ended March 31, 2025, a $0.5 million decrease in salaries and related benefit costs due to lower headcount as a result of the restructuring implemented during the third quarter of 2025, and a $0.2 million decrease in stock based compensation expense.

Other income (expense)

Change in Fair Value of Warrants

The $4.3 million gain attributable to the change in fair value of warrants for the three months ended March 31, 2026, compared to the same period in 2025, was due to mark to market fluctuations in our warrant liabilities due to the decline in value of our Common Stock during the applicable periods, as well as the issuance of the Inducement Warrants, for which there were no comparable mark to market fluctuations in the prior period.

Change in Fair Value of Debt

The $0.8 million loss attributable to the change in fair value of debt for the three months ended March 31, 2026, compared to the same period in 2025, was due to mark to market fluctuations in our convertible debt during the period.

Change in Fair Value of Revenue Interest Financing

The $1.8 million loss attributable to the change in fair value of the Revenue Interest Financing for the three months ended March 31, 2026, compared to the $3.8 million loss for the same period in 2025, was due to mark to market fluctuations in our Revenue Interest Financing during the period.

Change in Fair Value of Earn-Out Liabilities

The $0.9 million change in value of earn-out liabilities for the three months ended March 31, 2026, compared the same period in 2025, was due to fluctuations in our stock price.

Warrant Inducement Expense

The $4.1 million loss attributable to the Warrant inducement charge for the three months ended March 31, 2026, compared the same period in 2025, was due to a $5.9 million loss related to the issuance of the Inducement Warrants, partially offset by a $1.7 million gain related to change in fair value of the Existing Warrants.

Other Income, Net

The change in Other income, net for the three months ended March 31, 2026, compared to the same period in 2025, was a gain of $0.3 million attributable to a $0.1 million gain related to the Share Obligation.

Provision for Income Taxes

We recorded a provision for income taxes of less than $0.1 million for the three months ended March 31, 2026, compared to $0.1 million for the same period in 2025. The provision for income taxes is due to net income in certain foreign jurisdictions.

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 March 31, 2026 we had $5.1 million in cash and cash equivalents. We incurred operating losses of $3.7 million and $7.3 million for the three months ended March 31, 2026 and 2025, respectively. We incurred cash outflows from operating activities of $3.2 million and $9.5 million during the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, we had an accumulated deficit of $257.1 million. We expect to continue to generate operating losses for the foreseeable future.

Our future capital requirements will depend on many factors, including:

Our revenue for the three months ended March 31, 2026 was $2.9 million, which represented a year-over-year decrease of 47%. The decrease in revenue was primarily the result of lower investment in sales and marketing as we move our strategy to "business to business to customer" and away from direct to customer and distributor transitions initiated in the second quarter of 2025. The decrease was also driven by selling less or no product to certain distributors and accounts to manage our credit risk. 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 our sales of our gastric balloon system, the occurrence of other events, or the realization of the risks described in our 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 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. Additionally, the Company has entered into an Exchange Agreement with RTW, as disclosed in Note 11, Capital Stock and Stockholders Deficit, under which the Company's existing credit facilities will be exchanged for preferred stock upon the satisfaction of certain closing conditions. Based on the Company's 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 noncompliance with certain financial covenants under its credit facilities, the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are issued.

Financing Arrangements

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 entered into the Revenue Interest Financing Agreement on February 9, 2023 and received the proceeds at the closing of the Business Combination. On April 14, 2024, the Revenue Interest Financing Agreement was amended to, among other things, increase the rate of revenue interest payments to be paid to RTW. 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, 2025. See Note 8, Revenue Interest Financing, Side Letter, and PIPE Conversion Option in the notes to our annual consolidated financial statements for the years ended December 31, 2025 and 2024 for additional details regarding the Revenue Interest Financing Agreement.

On October 22, 2024, funds affiliated with RTW provided notice to the Company of their election under the Amended and Restated RTW Side Letter to surrender 30,000 shares of Common Stock of the Company representing $7.5 million in consideration for an additional Revenue Interest Financing Agreement. Accordingly, on October 30, 2024, the Company and the funds affiliated with RTW entered into the New RIFA.

Chardan Purchase Agreement

On December 18, 2023, we entered into the ChEF Purchase Agreement with Chardan. 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.

The Company had sold all shares registered under the Exchange Cap, or 377,879 shares of Common Stock to Chardan at a purchase price of $1.8 million in connection with the Purchase Agreement as of the year ended December 31, 2025.

Note Purchase Agreement

On April 16, 2024, we received $48.0 million in gross proceeds from the Amended Note Purchase Agreement with RTW, which proceeds were used to repay all outstanding principal, accrued and unpaid interest and other obligations with respect to the Fortress Term Loan.

On April 15, 2025, we entered into the Second Amendment to Note Purchase Agreement with the Purchasers and RTW. On April 16, 2025, pursuant to the Second Amendment to Note Purchase Agreement, the Purchasers provided notice of conversion of $5.0 million of principal amount of the RTW Convertible Notes based on the closing price of the Common Stock on the immediately preceding trading day and resulting market capitalization of less than $15.0 million. The parties agreed that the Market Capitalization Condition was triggered and such mandatory conversion of $5.0 million of principal amount of the RTW Convertible Notes shall

occur at the floor price of $3.35 per share. We subsequently issued an aggregate of 1,492,539 shares of Common Stock (subject to rounding for fractional shares) in accordance with the terms of the Second Amendment to Note Purchase Agreement.

On November 4, 2025, pursuant to the terms of the Second Amendment to Note Purchase Agreement, the Purchasers provided notice of conversion of $5.0 million of principal amount of the RTW Convertible Notes at the Floor Conversion Rate, which notice was accepted by the Company on November 5, 2025. The Company subsequently issued an aggregate of 1,492,539 shares of Common Stock to the Purchasers in accordance with the terms of the Second Amendment to Note Purchase Agreement.

As of March 31, 2026, $38.0 million of the RTW Convertible Notes remains outstanding (excluding accrued PIK interest) and is included in current portion of convertible notes payable on our consolidated balance sheets at fair value. See Note 7, Debt, in the notes to our annual consolidated financial statements for the years ended December 31, 2025 and 2024 for additional details related to the Notes.

July 2024 Public Offering and Concurrent Private Placement

On July 1, 2024, we received $15.2 million in net proceeds from the issuance of 576,261 shares of Common Stock and 662,701 warrants to purchase Common Stock, and $2.5 million in net proceeds from the sale and issuance of 2,260,159 shares of Series A Preferred Stock (as converted to 90,407 shares of Common Stock following the Series A Stockholder Approval and Reverse Stock Split) and 90,407 private placement warrants to purchase Common Stock, in each case at an offering price of $30.00 per share and accompanying warrant. On July 5, 2024, the Underwriters partially exercised their option to purchase an additional 77,091 shares of Common Stock for additional net proceeds of $2.2 million.

January 2025 RTW Private Placement

On January 16, 2025, we received net proceeds of $2.5 million from the issuance of 841,751 shares of Common Stock to funds affiliated with RTW at a purchase price of $2.97 per share.

January 2025 Public Offering and Concurrent Private Placement

On January 27, 2025, we received net proceeds of $5.8 million, from the issuance of 1,240,000 shares of Common Stock and 1,240,000 January 2025 Warrants at an offering price of $6.00 per share and accompanying warrant.

Leavitt Private Placement

On February 20, 2025, we received net proceeds of $1.3 million, from the issuance of 267,686 shares of Common Stock and 535,372 Leavitt Private Placement Warrants at an offering price of $5.23 per share and accompanying warrant.

February 2025 Public Offering and Concurrent Private Placement

On February 20, 2025, the Company received net proceeds of $3.9 million, from the issuance of 900,000 shares of Common Stock and 1,800,000 February 2025 Warrants at an offering price of $5.23 per share and accompanying warrant.

November 2025 Private Placement

On November 11, 2025, the Company entered into the November 2025 Securities Purchase Agreement with certain accredited investors named therein, pursuant to which the Company agreed to issue and sell 2,994,012 November 2025 Private Placement Shares and accompanying November 2025 Private Placement Warrants to purchase up to 2,994,012 shares of Common Stock for an aggregate purchase price of approximately $5.0 million at a purchase price of $1.67 per share and accompanying Private Placement Warrant.

Exchange Agreement with RTW

On November 11, 2025, the Company entered into the Exchange Agreement with certain entities managed by RTW, pursuant to which RTW has agreed to exchange all of the (i) principal amount of the Notes, purchased pursuant to the terms of the Note Purchase Agreement, including interest accrued on the Notes; (ii) Company obligations under the Revenue Interest Financing Agreement; and (iii) Company obligations under the New RIFA for shares of Series B Preferred Stock.

Warrant Inducement

On February 24, 2026, the Company entered into the Inducement Letter with certain holders of its Existing Warrants, pursuant to which these holders agreed to exercise for cash certain of their Existing Warrants to purchase an aggregate of 2,659,565 shares of Common Stock (the "Warrant Inducement") in exchange for the Company's agreement to issue to such holder new warrants (the "Inducement Warrants") to purchase up to an aggregate of 5,319,130 shares of Common Stock at an exercise price of $1.15. The Warrant Inducement resulted in approximately $3.1 million of gross proceeds.

Material Cash Requirements for Known Contractual and Other Obligations

Leases

We have entered into various non-cancellable operating leases for our corporate office, manufacturing facilities, research and development labs, management office space and certain equipment. The leases have varying terms expiring between 2026 and 2028. See Note 15, Commitments and Contingencies for additional details related to our noncancelable operating leases.

RTW Convertible Notes

On April 16, 2024, we received $48 million in gross proceeds from the Amended Note Purchase Agreement with RTW, which proceeds were used to repay all outstanding principal, accrued and unpaid interest and other obligations with respect to the Fortress Term Loan.

On April 15, 2025, we entered into the Second Amendment to Note Purchase Agreement. On April 16, 2025, pursuant to the Second Amendment to Note Purchase Agreement, the Purchasers provided notice of conversion of $5.0 million of principal amount of the RTW Convertible Notes based on the closing price of the Common Stock on the immediately preceding trading day and resulting market capitalization of less than $15.0 million. The parties agreed that the Market Capitalization Condition was triggered and such mandatory conversion of $5.0 million of principal amount of the RTW Convertible Notes shall occur at the floor price of $3.35 per share. We subsequently issued an aggregate of 1,492,539 shares of Common Stock (subject to rounding for fractional shares) in accordance with the terms of the Second Amendment to Note Purchase Agreement. On November 4, 2025, the Purchasers provided notice of a conversion of $5.0 million of principal amount of RTW Convertible Notes and we accepted the notice on November 5, 2025. We subsequently issued an aggregate of 1,492,539 shares of Common Stock (subject to rounding for fractional shares) at the floor price of $3.35 per share in accordance with the terms of the Second Amendment to Note Purchase Agreement.

Revenue Interest Financing

We received $40.0 million in proceeds from the Revenue Interest Financing Agreement with RTW on August 1, 2023. 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 at certain specified rates. On April 14, 2024, the Revenue Interest Financing Agreement was amended to, among other things, increase the rate of revenue interest payments to be paid to RTW for net sales less than or equal to $100 million prior to December 31, 2026 was increased from 6% to 12%, and increase the royalty rate on net sales less than or equal to $100 million on or after January 1, 2027 was increased from 10% to 12%.

If RTW has not received aggregate revenue interest payments equal to at least 100% of the Investment Amount by December 31, 2027, we must make a cash payment in an amount sufficient to catch RTW up to 100% of the Investment Amount. 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.

Further, on October 22, 2024, funds affiliated with RTW provided notice to the Company of their election under the Amended and Restated RTW Side Letter (as amended) to surrender 30,000 shares of Common Stock of the Company representing $7.5 million in consideration for an additional Revenue Interest Financing Agreement. Accordingly, on October 30, 2024, the Company and the funds affiliated with RTW entered into the New RIFA. The New RIFA has substantially identical terms and conditions as the RIFA Amendment, except that the amount of financing provided under the Additional Revenue Interest Financing Agreement is equal to the conversion amount of $7.5 million.

Research and Development Costs

We have completed our U.S. FDA AUDACITY clinical trial after submitting the fourth and final module of the PMA in June 2025 and receiving FDA approval in February 2026 and expect our expenses to decrease significantly as we continue to make payments related to the obligations with each clinical trial site. Our clinical trial costs are dependent on, among other things, the size, number, and length of our clinical trial.

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.

Cash Flows

The following table sets forth a summary of cash flows for the periods presented:

Net Cash Used in Operating Activities

Three Months Ended March 31, 2026

During the three months ended March 31, 2026, operating activities used $3.2 million of cash resulting from a net loss of $6.1 million, cash used from changes in our operating assets and liabilities of $1.0 million, partially offset non-cash expenses of $3.9 million.

Non-cash expense consisted of $4.1 million of warrant inducement expense, $1.8 million of expense related to the change in fair value of our Revenue Interest Financing, $0.8 million of expense related to the change in fair value of debt, $0.6 million of stock-based compensation expense, a $0.4 million provision for inventory, $0.2 million of issuance costs associated with warrants recorded at fair value, $0.2 million of depreciation and amortization, $0.1 million of non-cash lease expense, and $0.1 million of unrealized losses. This non-cash expense was partially offset by $4.3 million of income related to the change in fair value of warrants and $0.1 million of income related to the change in fair value of the Share Obligation.

Net cash used in our operating assets and liabilities consisted of a $1.7 million decrease in accounts payable, accrued expenses, and other current liabilities and a $0.1 million decrease in our lease liabilities. This was partially offset by a $0.4 million decrease in accounts receivable, a $0.2 million decrease in inventory, and a $0.2 million decrease in prepaid expenses.

The net decrease in accounts payable, accrued expenses and other current liabilities was primarily related to decreased expenses resulting from the restructuring implemented during the third quarter of 2025 and timing of payments.

Three Months Ended March 31, 2025

During the three months ended March 31, 2025, operating activities used $9.5 million of cash resulting from cash used from changes in our operating assets and liabilities of $4.8 million, non-cash income of $3.2 million, and a net loss of $1.5 million.

Non-cash income consisted of $5.7 million of income related mark to market adjustments related to our warrant liabilities, $3.3 million of income related to the change in fair value of our convertible debt, $0.9 million of income related to the change in fair value of our earn-out liabilities, and $0.3 million on unrealized gains. This non-cash income was partially offset by $3.8 million of expense related to the change in fair value of our Revenue Interest Financing, $1.1 million of issuance costs associated with warrants recorded at fair value, $0.9 million of stock-based compensation expense, a $0.7 million loss on changes in fair value of the Share Obligation, $0.2 million of non-cash lease expense, and $0.2 million of depreciation and amortization expense.

Net cash used in our operating assets and liabilities consisted of a $3.9 million decrease in accounts payable, accrued expenses, and other current liabilities, a $0.9 million increase in accounts receivable, and a $0.2 million decrease in our lease liabilities, partially offset by a $0.1 million decrease in prepaid expenses, other current and long-term assets and a less than $0.1 million decrease in inventory.

The net decrease in accounts payable, accrued expenses and other current liabilities was primarily related to decreased expenses resulting from the restructuring implemented during the fourth quarter of 2024 and timing of payments. The increase in accounts receivable was the result of an increase in revenue and decrease in cash collections.

Net Cash Used in Investing Activities

Three Months Ended March 31, 2026 and 2025

During the three months ended March 31, 2026 and 2025, cash used in investing activities was zero.

Net Cash Provided by Financing Activities

Three Months Ended March 31, 2026 and 2025

During the three months ended March 31, 2026, cash provided by financing activities was $2.9 million of net proceeds from the Warrant Inducement.

During the three months ended March 31, 2025, cash provided by financing activities was $14.5 million, consisting of $14.5 million of net proceeds from the RTW Private Placement, January 2025 Offering, February 2025 Offering, and Leavitt Private Placement.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes in our critical accounting policies and significant judgments and estimates as compared to those disclosed in "Part II, Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. See Note 2, Summary of Significant of Accounting Policies in the accompanying notes to the condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for additional details of our accounting policies.

Recent Accounting Pronouncements

See Note 2, Summary of Significant of Accounting Policies in the accompanying notes to the condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for a description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows.

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. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

Additionally, we are a "smaller reporting company" as defined in Item 10(f)(1) of Regulation S-K, which allows us to take advantage of certain exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of our Common Stock held by non-affiliates exceeds $250 million as of the prior June 30, and (ii) our annual revenue exceeded $100 million during such completed fiscal year or the market value of the shares of our Common Stock held by non-affiliates exceeds $700 million as of the prior June 30. 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.