Avinger Inc (NASDAQ:AVGR), a medical device company with a market capitalization of just $2.62 million, disclosed on Wednesday that it is facing a potential default on its financial obligations due to a liquidity shortfall and is considering liquidation as a possible course of action. According to InvestingPro analysis, the company has been quickly burning through cash, with negative EBITDA of $17.18 million in the last twelve months.
The company, based in Redwood (NYSE:RWT) City, California, reported in a recent SEC filing that it had failed to comply with a $3.5 million minimum liquidity covenant as required by a loan agreement with CRG Partners III L.P. As of December 11, 2024, Avinger has an outstanding balance of approximately $2.8 million in principal and interest under this agreement.
InvestingPro data shows the company operates with a debt-to-equity ratio of 1.44 and a current ratio of 1.21, indicating a moderate debt level but tight liquidity position. Non-compliance with the liquidity requirement constitutes an immediate event of default, which could lead to the acceleration of debt repayment obligations.
In addition to the liquidity issues, Avinger has proposed an assignment for the benefit of creditors followed by a voluntary dissolution and liquidation, subject to approval at a special meeting of stockholders scheduled for January 17, 2025. If the board of directors deems these actions to be in the best interests of the company and its shareholders, it could trigger a default under the terms of the loan agreement.
The proposed assignment would involve transferring all of the company's assets to an assignee, who would then liquidate the assets and distribute the proceeds to creditors. This process would likely result in the common stock being delisted from the Nasdaq exchange, and it is considered unlikely that common stockholders would receive any distribution given the company's current liabilities.
The company's management and board of directors are participants in the solicitation of proxies from stockholders for the upcoming special meeting, where the proposed liquidation will be put to a vote.
This report is based on a press release statement and provides a summary of the key facts without speculation or subjective assessment. The full impact of these developments on Avinger's operations and financial position will become clearer as further details are made available.
For investors seeking comprehensive analysis of companies facing financial challenges, InvestingPro offers detailed financial health scores and real-time monitoring tools across 1,400+ US stocks, helping identify early warning signs of financial distress.
In other recent news, Avinger Inc is facing a potential delisting from the Nasdaq due to non-compliance with the minimum bid price requirement. The medical device company has been given until May 19, 2025, to regain compliance, which requires maintaining a closing bid price of at least $1 for a minimum of ten consecutive business days. The firm is closely monitoring its share price and evaluating all options to regain compliance.
In financial developments, Avinger reported a slight decrease in total revenue to $1.7 million for the third quarter of 2024, according to recent earnings call and SEC filings. However, the company has seen improvements in gross margins to 26% and a decrease in operating expenses to $4.1 million due to strategic cost-saving initiatives such as a significant workforce reduction. Net loss and adjusted EBITDA loss have also improved by 15% and 12% respectively compared to the previous quarter.
In terms of product and market development, Avinger has launched Pantheris LV, continues to commercialize Tigereye ST, and is progressing with Phase III testing of a new coronary device. A partnership with Zylox-Tonbridge is expected to expand the company's market in China, with regulatory filings in China expected to be completed by the end of 2024 and clearance anticipated in 2025. These are the recent developments for Avinger.
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