Allurion Technologies(US:ALUR)2025-08-19 21:18Explanatory Note and Restatement Restatement Background The company is restating financial statements for prior periods, including Q2 2024, due to an accounting error from a material weakness in internal controls, impacting net income and equity components but not revenue or cash - An accounting error was identified, leading to the restatement of financial statements for multiple periods, including the quarter ended June 30, 202467 - The error caused misstatements in Other comprehensive income (loss), Other income (expense), Net income (loss), Accumulated other comprehensive income (loss), and Accumulated deficit9 - The error was attributed to an existing material weakness related to a lack of sufficient staff with public company and technical accounting experience, but importantly, the error did not affect revenue, gross profit, operating profit, or cash balances9 - As a result of the error and restatement, management concluded that the Company's disclosure controls and procedures were not effective as of June 30, 202511 PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited financial statements for H1 2025 show a $10.8 million net loss and a $64.0 million stockholders' deficit, raising substantial doubt about the company's going concern due to recurring losses Condensed Consolidated Financial Statements H1 2025 saw revenue decline to $9.0 million and a $10.8 million net loss, with cash at $12.7 million and a $64.0 million stockholders' deficit Condensed Consolidated Statements of Operations Highlights (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 (Restated) | | :--- | :--- | :--- | | Revenue | $8,959 | $21,152 | | Gross Profit | $6,658 | $15,859 | | Loss from Operations | $(14,234) | $(20,736) | | Net Loss | $(10,836) | $(6,326) | | Net Loss Per Share (Basic & Diluted) | $(1.79) | $(3.30) | Condensed Consolidated Balance Sheet Highlights (In thousands) | Metric | June 30, 2025 | December 31, 2024 (Restated) | | :--- | :--- | :--- | | Cash and cash equivalents | $12,722 | $15,379 | | Total Assets | $28,169 | $32,813 | | Total Liabilities | $92,145 | $110,791 | | Total Stockholders' Deficit | $(63,976) | $(77,978) | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 (Restated) | | :--- | :--- | :--- | | Net cash used in operating activities | $(17,082) | $(17,563) | | Net cash used in investing activities | $0 | $(539) | | Net cash provided by (used in) financing activities | $14,428 | $(673) | | Net decrease in cash | $(2,654) | $(18,775) | Notes to Unaudited Condensed Consolidated Financial Statements Notes disclose a 'Going Concern' warning due to recurring losses, detail financial restatements and debt agreements, and reveal a post-quarter strategic restructuring with a 65% workforce reduction - The company has concluded there is substantial doubt about its ability to continue as a going concern for one year, due to recurring losses, negative operating cash flows, and the need to raise additional capital47 - On August 5, 2025, the company announced a strategic restructuring plan to focus on GLP-1 combination therapy and U.S. market entry, which includes a reduction of approximately 70 employees (65% of its workforce) with expected severance charges of $1.5 million214 - The company is involved in a legal proceeding with Vanderbilt University Medical Center, which is seeking damages of approximately $2.5 million for an alleged breach of a Clinical Trial Agreement199350 - In August 2024, sales of the Allurion Balloon were suspended in France by the regulatory authority ANSM, but sales were cleared to resume in February 2025 after the company implemented a remediation plan202 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 58% revenue decline in H1 2025, reduced operating expenses, and critical liquidity issues, with substantial doubt about going concern, necessitating financing and a strategic restructuring including workforce reduction Results of Operations H1 2025 revenue fell 58% to $9.0 million, with gross profit also down 58%, while total operating expenses decreased 43% to $20.9 million, improving loss from operations to $14.2 million Comparison of Results for the Six Months Ended June 30 (In thousands) | Metric | 2025 | 2024 (Restated) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $8,959 | $21,152 | $(12,193) | -58% | | Gross Profit | $6,658 | $15,859 | $(9,201) | -58% | | Total Operating Expenses | $20,892 | $36,595 | $(15,703) | -43% | | Loss from Operations | $(14,234) | $(20,736) | $6,502 | 31% | - The 58% decrease in revenue for the first half of 2025 was primarily caused by distributor transitions, lower investment in sales and marketing, the temporary suspension of sales in France, and efforts to manage credit risk with certain distributors272291 - Sales and marketing expenses decreased by 53% due to lower headcount from a Q4 2024 restructuring and a strategic reorganization of marketing spend towards more efficient channels276 - Research and development expenses decreased by 56%, mainly due to a $3.0 million reduction in costs related to the AUDACITY clinical trial as the PMA submission was completed278 Liquidity and Capital Resources As of June 30, 2025, the company held $12.7 million in cash but faces substantial doubt about its going concern due to recurring losses and negative cash flows, necessitating $14.4 million in H1 2025 financing activities - The company had $12.7 million in cash and cash equivalents as of June 30, 2025, and an accumulated deficit of $233.0 million290 - Management explicitly states that based on recurring losses and the need for additional capital, there is substantial doubt about the company's ability to continue as a going concern for one year from the report's issuance date292 - During the first six months of 2025, the company raised $14.4 million from financing activities, primarily through public offerings and private placements327 - Key financing arrangements include the RTW Convertible Notes ($43.0 million outstanding), the Chardan Equity Facility, and a Revenue Interest Financing Agreement with RTW301302304 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces low interest rate risk but significant foreign currency exchange risk, primarily in Europe, with a 10% adverse change potentially impacting net income by 3%; no hedging activities are currently employed - The company does not have significant interest rate risk, with cash equivalents in money market funds and no variable rate debt as of June 30, 2025334335 - The company is exposed to foreign currency risk from transactions denominated in currencies other than the U.S. dollar, with primary exposure in Europe, where a 10% adverse change in exchange rates would have impacted net income by approximately 3% for the six months ended June 30, 2025336338 - The company has not engaged in any foreign currency hedging activities to date338 Item 4. Controls and Procedures Management concluded disclosure controls were ineffective as of June 30, 2025, due to material weaknesses in internal control over financial reporting, including staffing and IT issues, with a remediation plan underway - The CEO concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025341 - The ineffectiveness is due to material weaknesses in internal control over financial reporting, including: insufficient segregation of duties, lack of staff with public company/technical accounting experience, and insufficient IT controls342 - A remediation plan is underway, which involves hiring more experienced accounting staff, implementing a new ERP system, adding more review controls, and hiring a national accounting firm to assist with control design344347 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company faces a legal proceeding from Vanderbilt University Medical Center, seeking approximately $2.5 million for an alleged breach of a Clinical Trial Agreement, which the company intends to defend - On August 12, 2025, Vanderbilt University Medical Center filed a complaint against the Company, alleging breach of a Clinical Trial Agreement and seeking damages of approximately $2.5 million350 Item 1A. Risk Factors Material risk factors include potential disruptions and resource strain from the August 2025 strategic restructuring and workforce reduction, alongside adverse impacts from changes in U.S. fiscal and tax policies like the OBBBA - The August 2025 strategic restructuring and workforce reduction may not yield anticipated savings, could disrupt business operations, and may strain the company's limited resources352353 - The company faces risks from potential changes in U.S. federal policies, including the 'One Big Beautiful Bill Act' (OBBBA) signed into law on July 4, 2025, which could affect the tax treatment of R&D expenses354 Other Part II Items This section confirms no reportable events for unregistered equity sales, senior security defaults, or mine safety disclosures, and no Rule 10b5-1 trading plan adoptions or terminations by directors/officers - There were no unregistered sales of equity securities, defaults upon senior securities, or mine safety disclosures to report for the period356357358 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the fiscal quarter359