UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact name of registrant as specified in its charter)
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(I.R.S. Employer |
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incorporation or organization) |
Identification Number) |
(Address of principal executive offices and zip code)
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(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading |
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of November 4, 2024, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
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our ability to continue as a going concern; |
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our ability to regain and remain in compliance with the listing requirements of the Nasdaq Capital Market; |
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the outcome of and expectations regarding our current clinical studies and any additional clinical studies we initiate; |
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our plans to modify our current products, or develop new products, to address additional indications; |
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our ability to obtain additional financing through future equity or debt financings; |
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the expected timing of 510(k) clearances by the U.S. Food and Drug Administration (“FDA”) which may include but are not limited to additional versions of Pantheris, Ocelot, Tigereye and Lightbox; |
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the expected timing of 510(k) submission to the FDA, and associated marketing clearances by the FDA, which may include but are not limited to additional versions of Pantheris, Ocelot, Tigereye and Lightbox; |
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our ability to realize benefits from our license and collaboration agreements with Zylox-Tonbridge; |
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the expected growth in our business and our organization; |
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our expectations regarding government and third-party payor coverage and reimbursement, including the ability of Pantheris to qualify for reimbursement codes used by other atherectomy products; |
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our ability to retain and recruit key personnel, including the continued development of our sales and marketing infrastructure; |
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our ability to obtain and maintain intellectual property protection for our products; |
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our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for, or ability to obtain, additional financing; |
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our expectations regarding revenue, cost of revenue, gross margins, and expenses, including research and development and selling, general and administrative expenses; |
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our ability to identify and develop new and planned products and acquire new products, including those for the coronary market; |
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our financial performance; |
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our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business, both in the United States and internationally; and |
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developments and projections relating to our competitors or our industry. |
We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2024. We urge you to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the United States Securities and Exchange Commission (“SEC”) as exhibits to the Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
AVINGER, INC.
AS OF AND FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
Page |
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Part I |
Financial Information |
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Item 1. |
Unaudited Financial Statements |
1 |
Condensed Balance Sheets |
1 |
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Condensed Statements of Operations and Comprehensive Loss |
2 |
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Condensed Statements of Stockholders’ Equity |
3 |
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Condensed Statements of Cash Flows |
5 |
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Notes to Condensed Financial Statements |
6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
38 |
Item 4. |
Controls and Procedures |
38 |
Part II |
Other Information |
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Item 1. |
Legal Proceedings |
38 |
Item 1A. |
Risk Factors |
39 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
43 |
Item 3. |
Defaults Upon Senior Securities |
43 |
Item 4. |
Mine Safety Disclosures |
43 |
Item 5. |
Other Information |
43 |
Item 6. |
Exhibits |
44 |
Signatures |
45 |
“Avinger,” “Pantheris,” “Lumivascular,” and “Tigereye” are trademarks of our company. Our logo and our other trade names, trademarks and service marks appearing in this Quarterly Report on Form 10-Q are our property. Other trade names, trademarks and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, our trademarks and trade names referred to in this Quarterly Report on Form 10-Q appear without the ™ symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and trade names.
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
AVINGER, INC.
CONDENSED BALANCE SHEETS
(unaudited)
(In thousands, except share and per share data)
September 30, |
December 31, |
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2024 |
2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Right of use asset |
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Property and equipment, net |
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Other assets |
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Total assets |
$ | $ | ||||||
Liabilities and stockholders’ equity (deficit) |
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Current liabilities: |
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Accounts payable |
$ | $ | ||||||
Accrued compensation |
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Preferred stock dividends payable |
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Accrued expenses and other current liabilities |
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Leasehold liability, current portion |
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Borrowings |
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Total current liabilities |
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Leasehold liability, long-term portion |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Stockholders’ equity (deficit): |
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Preferred stock issuable in series, par value of $ |
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Shares authorized: |
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Shares issued and outstanding: |
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Common stock, par value of $ |
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Shares authorized: |
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Shares issued and outstanding: |
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Additional paid-in capital |
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Accumulated deficit |
( |
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( |
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Total stockholders’ equity (deficit) |
( |
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Total liabilities and stockholders’ equity (deficit) |
$ | $ |
AVINGER, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(In thousands, except per share data)
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2024 |
2023 |
2024 |
2023 |
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Revenues |
$ | $ | $ | $ | ||||||||||||
Cost of revenues |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
( |
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( |
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( |
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Interest expense, net |
( |
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( |
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( |
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Other income (expense), net |
( |
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Net loss and comprehensive loss |
( |
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( |
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( |
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) | ||||||||
Accretion of preferred stock dividends |
( |
) | ( |
) | ||||||||||||
Gain on exchange of Series A for Series A-1 convertible preferred stock |
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Net loss applicable to common stockholders |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) | $ | ( |
) | ||||
Net loss per share attributable to common stockholders, basic and diluted |
$ | ( |
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$ | ( |
) |
$ | ( |
) | $ | ( |
) | ||||
Weighted average common shares used to compute net loss per share, basic and diluted |
AVINGER, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(unaudited)
(In thousands, except share data)
Convertible Preferred Stock |
Common Stock |
Additional Paid-in |
Accumulated |
Total Stockholders’ |
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Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Equity |
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Balance at June 30, 2023 |
$ | $ | $ | $ | ( |
) |
$ | ( |
) | |||||||||||||||||||
Issuance of common stock in public offerings, net of commissions and issuance costs |
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Conversion of CRG loan principal into Series E convertible preferred stock |
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Employee stock-based compensation |
— | — | ||||||||||||||||||||||||||
Reclassifications and adjustments due to rounding impact from reverse stock split for fractional shares |
( |
) | ||||||||||||||||||||||||||
Waiver of Series A preferred stock dividends |
— | — | ||||||||||||||||||||||||||
Net and comprehensive loss |
— | — | ( |
) |
( |
) |
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Balance at September 30, 2023 |
$ | $ | $ | $ | ( |
) |
$ | ( |
) |
Convertible Preferred Stock |
Common Stock |
Additional Paid-in |
Accumulated |
Total Stockholders’ |
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Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Equity |
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Balance at June 30, 2024 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||||||
Issuance of common stock in public offerings, net of commissions and issuance costs |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||
Conversion of CRG loan principal into Series H convertible preferred stock |
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Exercises of pre-funded warrants for common stock |
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Employee stock-based compensation |
— | — | ||||||||||||||||||||||||||
Accretion of preferred stock dividends |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||
Net and comprehensive loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balance at September 30, 2024 |
$ | $ | $ | $ | ( |
) | $ |
AVINGER, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
(unaudited)
(In thousands, except share data)
Convertible Preferred Stock |
Common Stock |
Additional Paid-in |
Accumulated |
Total Stockholders’ |
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Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Equity (Deficit) |
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Balance at December 31, 2022 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||||||
Issuance of common stock in public offerings, net of commissions and issuance costs |
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Conversion of CRG loan principal into Series E convertible preferred stock |
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Exercise of pre-funded warrants for common stock |
( |
) | ( |
) | ||||||||||||||||||||||||
Issuance of common stock upon vesting of restricted stock units |
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Employee stock-based compensation |
— | — | ||||||||||||||||||||||||||
Reclassifications and adjustments due to rounding impact from reverse stock split for fractional shares |
( |
) | ||||||||||||||||||||||||||
Net and comprehensive loss | — | — | — | — | — | ( |
) | (13,296 | ) | |||||||||||||||||||
Balance at September 30, 2023 |
$ | $ | $ | $ | ( |
) |
$ | ( |
) |
Convertible Preferred Stock |
Common Stock |
Additional Paid-in |
Accumulated |
Total Stockholders’ |
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Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Equity (Deficit) |
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Balance at December 31, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
Issuance of common stock and Series F preferred stock in a Private Placement, net of commissions and issuance costs |
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Issuance of common stock warrants in connection with the Private Placement |
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Exercises of pre-funded warrants for common stock | ||||||||||||||||||||||||||||
Issuance of common stock in public offerings, net of commissions and issuance costs |
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Conversion of CRG loan principal into Series H convertible preferred stock |
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Cancellation of Series A preferred stock |
( |
) | ||||||||||||||||||||||||||
Issuance of Series A-1 preferred stock, net of commissions and issuance costs |
— | — | ||||||||||||||||||||||||||
Issuance of common stock upon vesting of restricted stock awards |
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Net share settlement of restricted stock awards in satisfaction of tax obligations |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
Employee stock-based compensation |
— | — | ||||||||||||||||||||||||||
Accretion of preferred stock dividends |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||
Net and comprehensive loss |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balance at September 30, 2024 |
$ | $ | $ | $ | ( |
) | $ |
AVINGER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
Nine Months Ended September 30, |
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2024 |
2023 |
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Cash flows from operating activities |
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Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
— | — | ||||||
Depreciation and amortization |
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Amortization of debt issuance costs and debt discount |
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Stock-based compensation |
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Noncash interest expense and other charges |
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Change in right of use asset |
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Provision for excess and obsolete inventories |
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Other non-cash charges |
( |
) | ||||||
Changes in operating assets and liabilities: |
— | — | ||||||
Accounts receivable |
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Inventories |
( |
) | ||||||
Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
Other assets |
( |
) | ||||||
Accounts payable |
( |
) | ||||||
Accrued compensation |
( |
) | ( |
) | ||||
Accrued expenses and other current liabilities |
( |
) | ||||||
Other long-term liabilities |
( |
) | ||||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
Cash flows from investing activities | ||||||||
Purchase of property and equipment | ( |
) | ||||||
Net cash used in investing activities | ( |
) | ||||||
Cash flows from financing activities |
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Proceeds from the issuance of common stock and convertible preferred stock in a private placement, net of commissions and issuance costs |
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Proceeds from issuance of common stock upon warrant exercises |
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Proceeds from the issuance of common stock in public offerings, net of commissions and issuance costs |
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Net share settlement on restricted stock awards in satisfaction of tax obligations |
( |
) | ||||||
Net cash provided by financing activities |
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Net change in cash and cash equivalents |
( |
) | ||||||
Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
$ | $ | ||||||
Supplemental disclosure of cash flow information |
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Noncash investing and financing activities: |
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Increase to right of use asset and leasehold liability arising from lease amendment |
$ | $ | ||||||
Conversion of CRG loan principal and accrued interest into Series H convertible preferred stock |
$ | $ | ||||||
Accretion of preferred stock dividends |
$ | $ | ||||||
Reclassification of other long-term liabilities to accrued compensation |
$ | $ | ||||||
Transfers between inventory and property and equipment |
$ | $ |
See accompanying notes.
AVINGER, INC.
Notes to Condensed Financial Statements
1. Organization
Organization, Nature of Business
Avinger, Inc. (the “Company”), a Delaware corporation, was incorporated in March 2007. The Company designs, manufactures and sells image-guided, catheter-based systems that are used by physicians to treat patients with peripheral artery disease (“PAD”). Patients with PAD have a build-up of plaque in the arteries that supply blood to areas away from the heart, particularly the pelvis and legs. The Company manufactures and sells a suite of products in the United States (“U.S.”) and in select international markets. The Company has developed its Lumivascular platform, which integrates optical coherence tomography (“OCT”) visualization with interventional catheters and is the industry’s only system that provides real-time intravascular imaging during the treatment portion of PAD procedures. The Company’s Lumivascular platform consists of a capital component, Lightbox consoles, as well as a variety of disposable catheter products. The Company’s current catheter products include Ocelot, Tigereye and Tigereye ST, which are designed to allow physicians to penetrate a total blockage in an artery, known as a chronic total occlusion (“CTO”). The Company also has image-guided atherectomy products, Pantheris, Pantheris SV and Pantheris LV, which are designed to allow physicians to precisely remove arterial plaque in PAD patients. The Company is in the process of developing next-generation CTO crossing devices to target coronary CTO markets. The Company is located in Redwood City, California.
Liquidity Matters
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40) requires the Company to make certain disclosures if it concludes that there is substantial doubt about the entity’s ability to continue as a going concern within one year from the date of the issuance of these financial statements.
In the course of its activities, the Company has incurred losses and negative cash flows from operations since its inception. As of September 30, 2024, the Company had an accumulated deficit of $
The Company can provide no assurance that it will be successful in raising funds pursuant to additional equity or debt financings or that such funds will be raised at prices that do not create substantial dilution for its existing stockholders. Given the volatility in the Company’s stock price, any financing that the Company may undertake in the next twelve months could cause substantial dilution to its existing stockholders, and there can be no assurance that the Company will be successful in acquiring additional funding at levels sufficient to fund its various endeavors. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the macroeconomic environment has in the past resulted in and could continue to result in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits and reduced business and consumer spending, which could increase the cost of capital and/or limit the availability of capital to the Company.
If the Company is unable to raise additional capital in sufficient amounts or on terms acceptable to it, the Company may have to significantly reduce its operations or delay, scale back or discontinue the development and sale of one or more of its products. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s ultimate success will largely depend on its continued development of innovative medical technologies, its ability to successfully commercialize its products and its ability to raise significant additional funding.
Additionally, due to the substantial doubt about the Company’s ability to continue operating as a going concern and the “Material Adverse Change” clause in the Loan Agreement with CRG Partners III L.P. and certain of its affiliated funds (collectively “CRG”), the entire amount of outstanding borrowings at September 30, 2024 and December 31, 2023 has been classified as current in these financial statements. CRG has not purported that an Event of Default (as defined in the Loan Agreement) has occurred due to a Material Adverse Change.
Currently substantially all of the Company’s cash and cash equivalents are held at a single financial institution. The Company’s previous banking partner was acquired by another financial institution in 2023 following closure by state regulators. The Company has regained access to its accounts with the new institution and is currently reviewing its banking relationships. Potential future disruptions to financial institutions where the Company holds accounts or has credit arrangements, or more widespread disruptions in the financial services industry, could negatively impact the Company’s access to cash and cash equivalents.
If the Company is unable to access its cash and cash equivalents as needed, its financial position and ability to operate its business will be adversely affected.
Public Offerings
June 2024 Offering
On June 13, 2024, the Company entered into a securities purchase agreement with two institutional investors for the issuance and sale of
As a result, the Company issued (i)
In addition, the Company issued to the investors in the Offering (i) Series A-1 warrants (the “Series A-1 Warrants”) to purchase up to an aggregate of
The Series A-1 Warrants expire on the earlier of August 12, 2029 and
Pursuant to an engagement letter (the “Engagement Letter”) with H.C. Wainwright & Co., LLC (the “Placement Agent”), the Company, in connection with the Offering, issued warrants to designees of the Placement Agent (the “Placement Agent Warrants”) to purchase up to an aggregate of
At The Market Offering Agreement
On May 20, 2022, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (the “Agent”), as sales agent, pursuant to which the Company may offer and sell shares of common stock, par value $
Other than the ATM Agreement, the Company currently does not have any commitments to obtain additional funds.
Strategic Partnership and Private Placement
On March 4, 2024, the Company entered into a License and Distribution Agreement (the “License Agreement”) with Zylox-Tonbridge effective as of the Initial Closing (defined below), pursuant to which the Company will license and distribute certain of the Company’s products (including consumables) in the Greater China region, including mainland China, Hong Kong, Macao, and Taiwan (the “Territory”). Zylox-Tonbridge will lead all regulatory activities for the registration of the Avinger products in the Territory. Avinger will also license its intellectual property and know-how related to Avinger products to Zylox-Tonbridge so that Zylox-Tonbridge can manufacture the localized products in the Territory. Avinger will supply Avinger products to Zylox-Tonbridge until Zylox-Tonbridge’s manufacturing capability has been established and Zylox-Tonbridge has obtained the regulatory approval of the localized products manufactured by Zylox-Tonbridge. All sales of Avinger products locally manufactured by Zylox-Tonbridge with regulatory approval by the regulatory authorities in the Territory and commercialized in the Territory will be royalty bearing to Avinger at a rate from a mid-single to high-single digit percentage depending on the amount of gross revenue as defined in the License Agreement, with certain increases depending on the amount of product gross margin. The License Agreement has an initial term of
In connection with the License Agreement, on March 4, 2024, the Company and Zylox-Tonbridge also entered into a Strategic Cooperation and Framework Agreement in conjunction with the Initial Closing (the “Collaboration Agreement” and, together with the License Agreement, the “Strategic Collaboration”), which provides the opportunity for the Company to access certain Zylox-Tonbridge peripheral vascular products for distribution in the U.S. and Germany. The agreement also provides the option for Avinger to source finished goods inventory from Zylox-Tonbridge following registration of Zylox-Tonbridge’s manufacturing facility with the FDA.
Private Placement
On March 4, 2024, in connection with the Strategic Collaboration, the Company and Zylox-Tonbridge Medical Limited, a wholly-owned subsidiary of Zylox-Tonbridge (the “Purchaser”), entered into a Securities Purchase Agreement (the “Purchase Agreement”), pursuant to which the Purchaser agreed to purchase, in two tranches, up to an aggregate of $
Each share of Series F Preferred Stock has a stated value of $
Upon completion of the following as mutually agreed upon by the Company and the Purchaser: (i) the successful registration and listing under 21 CFR part 807 with the FDA of the Purchaser and one of its designated affiliates to manufacture Avinger’s products, and (ii) the Company achieving an aggregate of $
On May 22, 2024, the Company held a special meeting of stockholders to vote on the following proposals resulting from the Private Placement (i) accept conversion of the shares of Series F Preferred Stock in excess of
The Company engaged two financial advisors in connection with the Private Placement and agreed to pay them an aggregate cash fee equal to
Series A Preferred Stock Exchange
On March 5, 2024, the Company entered into a Securities Purchase Agreement (the “A-1 Securities Purchase Agreement”) with CRG to exchange all outstanding shares of Series A preferred stock for
CRG Loan Amendment
Also on March 5, 2024, the Company entered into Amendment No. 9 to Loan Agreement effective as of the Initial Closing (the “Amendment”) with CRG, which amends the Loan Agreement to, among other things:
- |
extend the interest-only period through December 31, 2026; |
- |
provide that interest payable through December 31, 2026 may be payable in kind rather than in cash; and |
- |
permit the payment of dividends on the preferred stock issued or issuable to the Purchaser. |
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. The accompanying unaudited condensed interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the Company’s financial information. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, or for any other interim period or for any future year. The December 31, 2023 condensed balance sheet data has been derived from audited financial statements. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules and regulations relating to interim financial statements. These unaudited condensed financial statements and notes should be read in conjunction with the financial statements included in the Company’s Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 20, 2024. The Company’s significant accounting policies are more fully described in Note 2 of the Notes to Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Management uses significant judgment when making estimates related to its stock-based compensation, accruals related to compensation, the valuation of the common stock warrants, provisions for doubtful accounts receivable and excess and obsolete inventories, clinical trial accruals, and its reserves for sales returns and warranty costs. Management bases its estimates on historical experience and on various other assumptions that are believed to be 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. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.
Concentration of Credit Risk, and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable to the extent of the amounts recorded on the balance sheets.
The Company’s policy is to invest in cash and cash equivalents, consisting of money market funds. These financial instruments are held in Company accounts at one financial institution, First Citizens Bank, which acquired the Company’s prior banking partner, Silicon Valley Bank, in March 2023. The counterparties to the agreements relating to the Company’s investments consist of financial institutions of high credit standing. The Company provides for uncollectible amounts when specific credit problems arise. Management’s estimates for uncollectible amounts have been adequate, and management believes that all significant credit risks have been identified at September 30, 2024 and December 31, 2023. The Company’s previous banking partner was acquired by another financial institution in 2023 following closure by state regulators. Although the Company has regained access to its accounts with this institution, now a division of the acquiring bank, and is currently reviewing its banking relationships, potential future disruptions to financial institutions where the Company holds accounts or has credit arrangements, or more widespread disruptions in the financial services industry, could negatively impact the Company’s access to cash and cash equivalents.
The Company’s accounts receivable are due from a variety of healthcare organizations in the United States and select international markets. The Company provides for uncollectible amounts when specific credit problems arise. Management’s estimates for uncollectible amounts have been adequate, and management believes that all significant credit risks have been identified at September 30, 2024 and December 31, 2023. At September 30, 2024, there was
Product Warranty Costs
The Company typically offers a
-year warranty on its products commencing upon the transfer of title and risk of loss to the customer. The Company accrues for the estimated cost of product warranties upon invoicing its customers, based on historical results. Warranty costs are reflected in the statement of operations and comprehensive loss as a cost of revenues. The warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from these estimates, revisions to the estimated warranty liability would be required. Periodically the Company assesses the adequacy of its recorded warranty liabilities and adjusts the amounts, as necessary. Warranty provisions and claims are summarized as follows (in thousands):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Beginning balance |
$ | $ | $ | $ | ||||||||||||
Warranty provision |
||||||||||||||||
Usage/Release |
( |
) |
( |
) |
( |
) | ( |
) | ||||||||
Ending balance |
$ | $ | $ | $ |
Net Loss per Share Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is computed by dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period, without consideration for potential dilutive common shares. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Any common stock shares subject to repurchase are excluded from the calculations as the continued vesting of such shares is contingent upon the holders’ continued service to the Company. As of September 30, 2024 and 2023, there were
shares subject to repurchase. Since the Company was in a loss position for all periods presented, basic net loss per share attributable to common stockholders is the same as diluted net loss per share attributable to common stockholders as the inclusion of all potentially dilutive common shares would have been anti-dilutive.
Net loss per share applicable to common stockholders was determined as follows (in thousands, except per share data):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Net loss applicable to common stockholders |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) | $ | ( |
) | ||||
Weighted average common stock outstanding, basic and diluted |
||||||||||||||||
Net loss per share attributable to common stockholders, basic and diluted |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) | $ | ( |
) |
The following potentially dilutive securities outstanding have been excluded from the computations of diluted weighted average shares outstanding because such securities have an anti-dilutive impact due to losses reported:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Common stock warrants equivalents |
||||||||||||||||
Common stock options |
||||||||||||||||
Convertible preferred stock |
||||||||||||||||
Unvested restricted stock units |
||||||||||||||||
Segment and Geographical Information
The Company operates and manages its business as
Fair Value Measurements
As of September 30, 2024 and December 31, 2023, cash equivalents were all categorized as Level 1 and consisted of money market funds. As of September 30, 2024 and December 31, 2023, there were no financial assets and liabilities categorized as Level 2 or 3. There were no transfers between fair value hierarchy levels during the three or nine months ended September 30, 2024 and September 30, 2023.
Recent Accounting Pronouncements
Recent accounting standards not yet adopted
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which among other things, simplifies the accounting models for the allocation of proceeds attributable to the issuance of a convertible debt instrument. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (i) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification (“ASC”) 815 or (ii) a convertible debt instrument was issued at a substantial premium. The ASU becomes effective for the Company, as a smaller reporting company as defined by the SEC, in the first quarter of 2024. The Company has not yet adopted this standard. This new standard is not expected to have a material impact on the Company’s financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This ASU requires that a public entity provide additional segment disclosures on an interim and annual basis. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements unless impracticable. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company has not yet adopted this standard. This new standard is not expected to have a material impact on the Company’s financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU No. 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, if any, with further disaggregation required for significant individual jurisdictions. The ASU is effective for the Company for fiscal years beginning after December 15. ASU No. 2023-09 allows for adoption using either a prospective or retrospective transition method. This new standard is not expected to have a material impact on the Company’s financial statements.
3. Inventories
Inventories consisted of the following (in thousands):
September 30, |
December 31, |
|||||||
2024 |
2023 |
|||||||
Raw materials |
$ | $ | ||||||
Work-in-process |
||||||||
Finished products |
||||||||
Total inventories |
$ | $ |
4. Borrowings
CRG
On September 22, 2015, the Company entered into a Term Loan Agreement, as amended (the “Loan Agreement”) with CRG under which, subject to certain conditions, the Company had the right to borrow up to $
On February 14, 2018, the Company and CRG further amended the Loan Agreement concurrent with the conversion of $
On August 2, 2023, the Company and CRG entered into a Securities Purchase Agreement (“Series E Purchase Agreement”) pursuant to which the Company issued
On May 16, 2024, the Company and CRG entered into another Securities Purchase Agreement (“Series H Purchase Agreement”) pursuant to which the Company issued
The Company has entered into several amendments to the Loan Agreement (the “Amendments”) with CRG since September 2015. The Amendments, among other things: (1) extended the interest-only period through December 31, 2026; (2) extended the period during which the Company may elect to pay a portion of interest in payment-in-kind (“PIK”), interest payments through December 31, 2026 so long as no Default (as defined in the Loan Agreement) has occurred and is continuing; (3) permitted the Company to make the entire interest payments in PIK interest payments through December 31, 2026 so long as no Default has occurred and is continuing; (4) extended the Stated Maturity Date (as defined in the Loan Agreement) to December 31, 2028; (5) reduced the minimum liquidity covenant to $
On January 26, 2024, the Company entered into Amendment No. 8 to the Loan Agreement with CRG, which reduced the minimum liquidity requirement of the Loan Agreement from $
On March 5, 2024, the Company entered into Amendment No. 9 to the Loan Agreement with CRG, which (1) extended the interest-only period through December 31, 2026; (2) extended the period during which the Company may elect to pay a portion of interest in PIK interest payments through December 31, 2026 so long as no Default (as defined in the Loan Agreement) has occurred and is continuing; (3) permitted the Company to make the entire interest payments in PIK interest payments through December 31, 2026 so long as no Default has occurred and is continuing; and (4) permit the payment of dividends on the preferred stock issued or issuable to the Purchaser. The Company assessed Amendment No. 9 to the Loan Agreement and determined that this represented a loan modification. As such, the unamortized portion of previous issuance costs incurred will be amortized over the modified term, and costs incurred with third parties was expensed as incurred.
On June 5, 2024, the Company entered into Amendment No. 10 to the Loan Agreement with CRG, which reduced the minimum liquidity requirement of the Loan Agreement from $
Under the amended Loan Agreement, no cash payments for either principal or interest are required until the first quarter of 2027. The interest will be accrued and included in the debt balance based (to the extent not paid) on principal amounts outstanding at the beginning of the quarter at an interest rate of
The Company may voluntarily prepay the borrowings in full, with a prepayment premium beginning at
The Loan Agreement requires that the Company adheres to certain affirmative and negative covenants, including financial reporting requirements, certain minimum financial covenants for a pre-specified liquidity requirement and a prohibition against the incurrence of indebtedness, or creation of additional liens, other than as specifically permitted by the terms of the Loan Agreement. In particular, the covenants of the amended Loan Agreement included a covenant that the Company maintain a minimum of $
As of September 30, 2024, the Company was in compliance with all applicable covenants under the Loan Agreement.
As of September 30, 2024, principal, final facility fee and PIK payments under the Loan Agreement, as amended, were as follows (in thousands):
Year Ending December 31, |
||||
2024 (remaining three months of the year) |
$ | |||
2025 |
||||
2026 |
||||
2027 |
||||
2028 |
||||
Total |
||||
Less: Amount of PIK additions and final facility fee to be incurred subsequent to September 30, 2024 |
( |
) | ||
Less: Amount representing debt issuance costs |
( |
) | ||
Borrowings, current portion, as of September 30, 2024 |
$ |
In connection with drawdowns under the Loan Agreement, the Company recorded aggregate debt discounts of $
While, as of the date hereof, CRG has not purported that an Event of Default has resulted due to a Material Adverse Change (as those terms defined in the Loan Agreement), due to the substantial doubt about the Company’s ability to continue operating as a going concern, the entire outstanding amount of borrowings under the Loan Agreement and associated aggregate debt discount at September 30, 2024 and December 31, 2023 were classified as current in these financial statements.
5. Leases
The Company’s operating lease obligations primarily consist of leased office, laboratory, and manufacturing space under a non-cancelable operating lease. In addition to the minimum future lease commitments presented below, the lease requires the Company to pay property taxes, insurance, maintenance, and repair costs. The most recent amendment also provides an optional
-year extension of the lease following the end of the current term on November 30, 2025, which was not included in the assessment of the lease term as it is not reasonably certain the Company will elect to exercise this option. Rent expense is recognized using the straight-line method over the term of the lease.
The current lease was to expire on November 30, 2024. On March 6, 2024, the Company entered into an amendment to the lease which extended the lease term for a period of one year, subsequent to the original expiration. As amended, the lease will expire on November 30, 2025. Under the terms of the amendment, the Company will be obligated to pay an additional $
In connection with the amendment the Company adjusted its right-of-use asset and lease liability to $
The Company’s operating lease expense, excluding variable maintenance fees and other expenses on a monthly basis, was approximately $
The following table presents the future operating lease payments and leasehold liability included on the balance sheet related to the Company’s operating lease as of September 30, 2024 (in thousands):
Year Ending December 31, |
||||
2024 (remaining three months of the year) |
$ | |||
2025 |
||||
Total |
||||
Less: Imputed interest |
( |
) |
||
Leasehold liability as of September 30, 2024 |
$ |
The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of September 30, 2024 and December 31, 2023 (in thousands):
Lease-Related Assets and Liabilities |
Financial Statement Line Items |
September 30, 2024 |
December 31,
2023 |
|||||||
Right of use assets: |
||||||||||
Operating lease |
Right of use asset |
$ | $ | |||||||
Total right of use assets |
$ | 1,427 | $ | |||||||
Lease liabilities: |
||||||||||
Operating lease |
Leasehold liability, current portion |
$ | $ | |||||||
Leasehold liability, long-term portion |
||||||||||
Total lease liabilities |
$ | $ |
6. Commitments and Contingencies
Purchase Obligations
Purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business. The Company had non-cancelable commitments to suppliers for purchases totaling approximately $
Legal Proceedings
The Company is not currently involved in any pending legal proceedings that it believes could have a material adverse effect on our financial condition, results of operations or cash flows. From time to time, the Company may be involved in legal proceedings or investigations, which could harm our reputation, business and financial condition and divert the attention of our management from the operation of our business.
7. Stockholders’ Equity
Convertible Preferred Stock
As of September 30, 2024 and December 31, 2023, the Company’s certificate of incorporation, as amended and restated, authorizes the Company to issue up to
Series A Preferred Stock Exchange
On March 5, 2024, the Company entered into the A-1 Securities Purchase Agreement with CRG to exchange all
The exchange was accounted for as a capital transaction constituting an extinguishment of the Series A preferred stock through the issuance of Series A-1 preferred stock with no net impact to stockholders’ deficit. At the time of the exchange, the Series A preferred stock had approximately $
Series A-1 Convertible Preferred Stock
Each share of Series A-1 preferred stock has a stated value of $
Series B Convertible Preferred Stock
The Series B preferred stock has a liquidation preference of $
Series E Convertible Preferred Stock
Each share of Series E preferred stock has a stated value of $
Series F Convertible Preferred Stock
On March 4, 2024, in connection with the Purchase Agreement (see Note 1), the Company issued
Series H Convertible Preferred Stock
On May 16, 2024, in connection with the Series H Purchase Agreement (see Note 4), the Company issued
Common Stock
As of September 30, 2024, the Company’s certificate of incorporation, as amended and restated, authorizes the Company to issue up to
March 2024 Offering
On March 5, 2024, in connection with the Purchase Agreement (see Note 1), the Company issued
June 2024 Offering
On June 17, 2024, in connection with the June 2024 Offering (see Note 1), the Company issued
Common Stock Warrants
As of September 30, 2024, the Company had outstanding warrants to purchase common stock as follows:
Total Outstanding and Exercisable |
Underlying Shares of Common Stock |
Exercise Price per Share |
Expiration Date |
|||||||||||||
Series 1 Warrants issued in the February 2018 Series B financing |
$ |
February 2025 |
||||||||||||||
Series 2 Warrants issued in the February 2018 Series B financing |
$ |
February 2025 |
||||||||||||||
Placement agent warrants issued in the January 2022 financing |
$ |
January 2027 |
||||||||||||||
Warrants issued in the January 2022 financing |
$ |
July 2027 |
||||||||||||||
Series A Preferred Investment Options issued in August 2022 financing |
$ |
February 2028 |
||||||||||||||
Placement agent Preferred Investment Options issued in the August 2022 financing |
$ |
August 2027 |
||||||||||||||
Advisor Warrants issued in the March 2024 financing |
$ |
March 2029 |
||||||||||||||
Pre-Funded Warrants issued in the June 2024 financing |
$ | n/a | ||||||||||||||
Series A-1 Warrants issued in the June 2024 financing |
$ |
See note (1) |
||||||||||||||
Series A-2 Warrants issued in the June 2024 financing |
$ |
See note (2) |
||||||||||||||
Series A-3 Warrants issued in the June 2024 financing |
$ |
See note (3) |
||||||||||||||
Placement Agent Warrants issued in the June 2024 financing |
$ |
June 2029 |
||||||||||||||
Total as of September 30, 2024 |
(1) |
The Series A-1 Warrants expire on the earlier of August 12, 2029 and |
(2) |
Series A-2 Warrants expire on the earlier of August 12, 2026 and |
(3) |
The Series A-3 Warrants expire on the earlier of May 12, 2025 and |
During the three months ended September 30, 2024, a total of
In accordance with their terms, the
As of December 31, 2023, the Company had outstanding warrants to purchase common stock as follows:
Total Outstanding and Exercisable |
Underlying Shares of Common Stock |
Exercise Price per Share |
Expiration Date |
||||||||||
Series 1 Warrants issued in the February 2018 Series B financing |
$ |
February 2025 |
|||||||||||
Series 2 Warrants issued in the February 2018 Series B financing |
$ |
February 2025 |
|||||||||||
Placement agent warrants issued in the January 2022 financing |
$ |
January 2027 |
|||||||||||
Warrants issued in the January 2022 financing |
$ |
July 2027 |
|||||||||||
Series A Preferred Investment Options issued in August 2022 financing |
$ |
February 2028 |
|||||||||||
Series B Preferred Investment Options issued in August 2022 financing |
$ |
August 2024 |
|||||||||||
Placement agent Preferred Investment Options issued in the August 2022 financing |
$ |
August 2027 |
|||||||||||
Total as of December 31, 2023 |
March 2024 Private Placement
On March 7, 2024, in connection with the closing of the Strategic Partnership and Private Placement, the Company issued Advisor Warrants at an exercise price of $
The exercise price and the number of shares of common stock issuable upon exercise of each Advisor Warrant are subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. In addition, in certain circumstances, upon a fundamental transaction, a holder of Advisor Warrants will be entitled to receive, upon exercise, the kind and amount of securities, cash or other property that such holder would have received had they exercised the Advisor Warrants prior to the fundamental transaction.
The Advisor Warrants can be exercised at the option of the holders at any time after they become exercisable provided that shares cannot be exercised into common stock if the applicable holder would beneficially own in excess of
June 2024 Offering
On June 13, 2024, the Company entered into a securities purchase agreement with two institutional investors resulting in the issuance of among other things, Pre-Funded Warrants in lieu of common stock to purchase up to an aggregate of
In addition, the Company issued to the investors in the Offering (i) Series A-1 Warrants to purchase up to an aggregate of
The Series A-1 Warrants expire on the earlier of August 12, 2029 and
In connection with the Offering, the Company also issued to the placement agent Placement Agent or its designees Placement Agent Warrants to purchase up to an aggregate of
The exercise price and the number of shares of common stock issuable upon exercise of each Pre-Funded Warrants, Series A-1 Warrants, Series A-2 Warrants, Series A-3 Warrants, and Placement Agent Warrants are subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. In addition, in certain circumstances, upon a fundamental transaction, a holder of Pre-Funded Warrants, Series A-1 Warrants, Series A-2 Warrants, Series A-3 Warrants, and Placement Agent Warrants will be entitled to receive, upon exercise, the kind and amount of securities, cash or other property that such holder would have received had they exercised the Pre-Funded Warrants, Series A-1 Warrants, Series A-2 Warrants, Series A-3 Warrants, and Placement Agent Warrants immediately prior to the fundamental transaction.
The Pre-Funded Warrants, Series A-1 Warrants, Series A-2 Warrants, Series A-3 Warrants, and Placement Agent Warrants can be exercised at the option of the holders at any time after they become exercisable provided that shares of the Pre-Funded Warrants, Series A-1 Warrants, Series A-2 Warrants, Series A-3 Warrants, and Placement Agent Warrants cannot be exercised into common stock if the applicable holder would beneficially own in excess of
In the event of a fundamental transaction in which the holders of our voting securities immediately prior to such fundamental transaction will not, following such fundamental transaction, directly or indirectly own more than 50% of the voting securities of the surviving entity or successor entity, and in which the Company is not the successor entity or does not continue as a reporting issuer under the Exchange Act, then, at the request of the holder, the Company or the successor entity shall purchase the unexercised portion of the Pre-Funded Warrants, Series A-1 Warrants, Series A-2 Warrants, Series A-3 Warrants, and Placement Agent Warrants from the holder by paying to the holder an amount, in cash, equal to the fair value of the remaining unexercised portion of the Pre-Funded Warrants, Series A-1 Warrants, Series A-2 Warrants, Series A-3 Warrants, and Placement Agent Warrants on the date of such fundamental transaction, subject to certain limitations in the event of a fundamental transaction not within our control.
8. Stock-Based Compensation
Stock Plans
In January 2015, the Board of Directors adopted and the Company’s stockholders approved the 2015 Equity Incentive Plan (“2015 Plan”). On December 22, 2023, the Company’s stockholders approved an additional