DEF 14A: Avinger Seeks Stockholder Approval for Preferred Stock Issuance and Potential Change of Control

Avinger, Inc. is holding a special meeting of stockholders to approve the issuance of preferred stock and related common stock conversions, which could result in a change of control.

Summary

• Avinger, Inc. is convening a special meeting of stockholders on May 22, 2024, to vote on proposals related to the issuance of Series F and Series G Preferred Stock.
• Proposal 1 seeks approval for the issuance of common stock exceeding 19.9% of outstanding shares upon conversion of Series F Preferred Stock, potentially triggering a change of control under Nasdaq rules.
• Proposal 2 concerns the issuance of Series G Preferred Stock and the subsequent conversion into common stock, potentially below the minimum price allowed by Nasdaq, and which may also be deemed a change of control.
• Proposal 3 requests authorization to adjourn the Special Meeting, if necessary, to further solicit votes for Proposals 1 and 2.
• The Board of Directors unanimously recommends voting FOR each of the proposals.
• The record date for determining stockholders eligible to vote is March 25, 2024.
• Zylox-Tonbridge Medical Limited has agreed to purchase up to $15 million in shares of the Company's common stock, Series F Preferred Stock, and Series G Preferred Stock.
• The initial closing on March 5, 2024, involved the issuance of 75,327 shares of common stock at $3.664 per share and 7,224 shares of Series F Preferred Stock at $1,000 per share, totaling $7.5 million.
• The Series G Preferred Stock issuance is contingent upon Zylox-Tonbridge's FDA registration for manufacturing Avinger's products and Avinger achieving $10 million in gross revenue within four consecutive fiscal quarters after the initial closing.
• The conversion price for Series G Preferred Stock will be the lowest of $3.664, the closing price on the day before the milestone closing, or the average closing price for the five trading days preceding the milestone closing, but no less than $0.20.

Sentiment

Score: 6

Explanation: The document is neutral in tone, primarily focused on outlining the proposals for stockholder approval. The potential for dilution is a concern, but the investment from Zylox-Tonbridge could be beneficial.

Positives

• The potential investment of up to $15 million from Zylox-Tonbridge could provide Avinger with significant capital.
• The Series G Preferred Stock issuance is tied to achieving $10 million in gross revenue, incentivizing growth.
• FDA registration of Zylox-Tonbridge as a manufacturer could streamline production and reduce costs.

Negatives

• The issuance of common stock upon conversion of Series F and G Preferred Stock will dilute existing stockholders' ownership.
• The potential issuance of common stock at less than the minimum price under Nasdaq Listing Rule 5635(d) could negatively impact the stock price.
• If the proposals are not approved, Zylox-Tonbridge will not be able to invest the additional $7.5 million and Avinger would not be able to issue the Series G Preferred Stock to Zylox-Tonbridge.

Risks

• Failure to obtain stockholder approval for the proposals could jeopardize the Zylox-Tonbridge investment.
• The conversion of preferred stock could lead to a significant increase in the number of shares eligible for sale, potentially depressing the market price.
• The company may be unable to raise additional capital if the shares underlying the Series F and G Preferred Stock are reserved.
• The Series G Preferred Stock issuance is contingent on achieving certain milestones, which may not be met.

Future Outlook

The company anticipates the potential issuance of common stock upon conversion of Series F and G Preferred Stock, contingent on stockholder approval and the achievement of certain milestones.

Management Comments

• Our Board of Directors unanimously recommends that our stockholders vote FOR each proposal.

Industry Context

This announcement reflects a strategic financing move by Avinger, potentially leveraging a partnership with Zylox-Tonbridge to expand manufacturing capabilities and market reach. Similar deals are common in the medical device industry, where companies often seek strategic investments to fund growth and innovation.

Comparison to Industry Standards

• The terms of the Zylox-Tonbridge investment, including the staged funding and milestones tied to FDA approval and revenue targets, are typical of venture capital and private equity investments in the medical device sector.
• The potential for significant dilution of existing shareholders is a common concern in such financings, and companies often attempt to balance the need for capital with the impact on existing ownership.
• Comparable companies in the medical device space, such as Spectranetics (acquired by Philips) and Cardiovascular Systems Inc. (CSI), have also utilized strategic investments and partnerships to drive growth and innovation.

Stakeholder Impact

• Existing stockholders will experience dilution upon conversion of the preferred stock.
• The investment from Zylox-Tonbridge could provide financial stability and growth opportunities for the company.
• Employees may benefit from the potential expansion of manufacturing capabilities and market reach.

Next Steps

• Stockholders to vote on the proposals at the Special Meeting on May 22, 2024.
• If approved, Avinger will proceed with the issuance of Series F and G Preferred Stock and the conversion into common stock.
• Zylox-Tonbridge to pursue FDA registration for manufacturing Avinger's products.
• Avinger to focus on achieving $10 million in gross revenue to trigger the issuance of Series G Preferred Stock.

Key Dates

Keywords

Avinger, Zylox-Tonbridge, Preferred Stock, Stockholder Approval, Common Stock, Nasdaq, Dilution, Investment, FDA, Milestones