DEF: Avinger Inc. Proposes Assignment for Benefit of Creditors Followed by Dissolution

Avinger, Inc. is seeking stockholder approval for an assignment for the benefit of creditors followed by a voluntary dissolution and liquidation due to ongoing financial challenges.

Summary

• Avinger, Inc. is proposing an assignment for the benefit of creditors, followed by a voluntary dissolution and liquidation.
• This action is being proposed due to the company's recurring operating losses, negative cash flows, and inability to secure additional financing or a buyer.
• The company's board believes this approach is the best option for creditors and may provide a small chance of future payments to stockholders, although this is unlikely.
• A special meeting of stockholders is scheduled for January 24, 2025, to vote on the proposal.
• If approved, the assignment would transfer all company assets to a third-party assignee for liquidation and distribution to creditors.
• After the assignment, the company will file a certificate of dissolution and cease all business activities except for winding up operations.
• The company had $5.9 million in cash and cash equivalents as of September 30, 2024, but this is not expected to be sufficient to continue operations.
• The company had total liabilities of $9.7 million and total assets of $13.6 million as of September 30, 2024, but has incurred additional liabilities since then.
• Certain preferred stock series have liquidation preferences totaling approximately $18.3 million, which must be paid before any distributions to common stockholders.
• It is unlikely that common stockholders will receive any distributions due to the company's liabilities and liquidation preferences.

Sentiment

Score: 2

Explanation: The document clearly indicates a negative outlook for the company, with a proposed assignment for the benefit of creditors and subsequent dissolution. The likelihood of any return for common stockholders is very low, and the company is ceasing operations. This indicates a very poor outcome for investors.

Positives

• The proposed assignment for the benefit of creditors may provide the best opportunity for recovery for the company's creditors.
• There is a small possibility, although unlikely, of future payments to stockholders after all creditors and preferred stockholders are paid.

Negatives

• The company has experienced recurring operating losses and negative cash flows.
• The company has been unable to secure additional financing or attract a buyer for its business.
• The company's cash and cash equivalents are not sufficient to continue as a going concern.
• It is unlikely that common stockholders will receive any distributions due to the company's liabilities and liquidation preferences.
• The company intends to delist from Nasdaq and terminate its SEC reporting status after the dissolution.
• Stockholders will not be able to freely trade their shares after the stock transfer books are closed.

Risks

• There is no assurance as to the amount of distributions, if any, to be made to stockholders.
• Stockholders may receive substantially less than the amount currently estimated, or they may receive no distribution at all.
• The timing of any distributions to stockholders is uncertain.
• Certain preferred stock series have liquidation preferences that must be satisfied before common stockholders receive any payments.
• Holders of certain warrants and preferred investment options have the right to require the company to repurchase their securities at their Black Scholes Value, which could further reduce funds available for distribution to stockholders.
• U.S. Holders may not be able to recognize a loss for U.S. federal income tax purposes until they receive a final distribution from the Assignee.
• The company's stock will not be freely transferable after the stock transfer books are closed.
• The company will cease all business activities except those relating to winding up and liquidating its business and affairs.

Future Outlook

The company does not expect its cash and cash equivalents to be sufficient to continue as a going concern for any significant period of time. The company anticipates that the assignment, if effected by the board of directors, will occur shortly after the date of the Special Meeting. Upon completion of the assignment and dissolution, the company intends to delist its shares from trading on Nasdaq and terminate its status as a reporting company with the SEC.

Management Comments

• Our Board of Directors unanimously recommends that our stockholders vote FOR each proposal.
• Our Board has deemed it advisable and in our best interests and those of our stockholders to seek stockholder approval to effect an assignment for the benefit of creditors followed by a voluntary dissolution and liquidation.
• Our Board believes that as compared to a filing under federal bankruptcy laws, the Assignment and Dissolution may present the best opportunity for recovery for our creditors and also may provide an opportunity for future payments to our stockholders, although payments to stockholders are unlikely.

Industry Context

The medical device industry is highly competitive, and Avinger has struggled to secure funding and attract a buyer, leading to the proposed dissolution. This situation highlights the challenges faced by smaller companies in this sector when they are unable to achieve profitability or secure additional capital.

Comparison to Industry Standards

• Many small medical device companies face similar challenges in securing funding and achieving profitability.
• Companies like Avinger often rely on venture capital and strategic partnerships to fund their operations and product development.
• The inability to secure additional funding or a buyer is a common reason for companies in this sector to pursue liquidation or bankruptcy.
• The proposed assignment for the benefit of creditors is a less common approach than a Chapter 11 bankruptcy filing, but it is sometimes used as an alternative for companies with limited assets and complex debt structures.
• The liquidation preferences of preferred stock are a standard feature in venture-backed companies, and they often result in common stockholders receiving little or no value in a liquidation scenario.

Stakeholder Impact

• Shareholders are likely to lose most or all of their investment.
• Creditors may recover some of their outstanding debts through the assignment process.
• Employees will likely lose their jobs as the company ceases operations.
• Customers and suppliers will need to find alternative partners.

Next Steps

• Stockholders will vote on the proposed assignment for the benefit of creditors and dissolution at the Special Meeting on January 24, 2025.
• If approved, the company will proceed with the assignment and file a certificate of dissolution.
• The company will cease all business activities except for winding up operations.
• The company intends to delist from Nasdaq and terminate its SEC reporting status.

Key Dates

Keywords

assignment for benefit of creditors, dissolution, liquidation, bankruptcy, financial distress, creditors, stockholders, preferred stock, warrants, delisting