Avinger Inc (Form: 10-Q, Received: 11/09/2022 17:11:55)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36817

AVINGER, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-8873453
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

400 Chesapeake Drive

Redwood City, California 94063

(Address of principal executive offices and zip code)

(650) 241-7900

(Telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:		Trading Symbol(s):		Name of each exchange on which registered:
Common Stock, par value $0.001 per share		AVGR		The Nasdaq Capital Market

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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 ☐

Non-accelerated filer ☒		Smaller reporting company ☒

		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 ☐ No ☒

As of November 4, 2022, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 7,435,644.

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:

●

the outcome of and expectations regarding our current clinical studies and any additional clinical studies we initiate;

●

our plans to modify our current products, or develop new products, to address additional indications;

●

our ability to obtain additional financing through future equity or debt financings;

●

the expected timing of 510(k) clearances by the FDA for additional versions of Pantheris, Ocelot, Tigereye and Lightbox;

●

the expected timing of 510(k) submission to the FDA, and associated marketing clearances by the FDA, for additional versions of Pantheris, Ocelot, Tigereye and Lightbox;

●

the expected growth in our business and our organization;

●

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;

●

our ability to remain in compliance with the listing requirements of the Nasdaq Capital Market;

●

our ability to retain and recruit key personnel, including the continued development of our sales and marketing infrastructure;

●

our ability to obtain and maintain intellectual property protection for our products;

●

our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for, or ability to obtain, additional financing;

●

our expectations regarding revenue, cost of revenue, gross margins, and expenses, including research and development and selling, general and administrative expenses;

●

our expectations of qualitative and quantitative effects of COVID-19 to the extent discussed, as well as any expectations of recovery from or forward looking short-term or long-term implications thereof;

	●	the effects of the COVID-19 pandemic on our business and results of operations;
	●	our ability to identify and develop new and planned products and acquire new products, including those for the coronary market;

	●	our financial performance;

	●	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

	●	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 22, 2022. 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, 2022

TABLE OF CONTENTS

		Page
Part I	Financial Information
Item 1.	Unaudited Financial Statements	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations and Comprehensive Loss	2
	Condensed Statements of Stockholders’ Equity	3
	Condensed Statements of Cash Flows	5
	Notes to Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

Part II	Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35

Signatures		36

“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,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	17,342		$	19,497
Accounts receivable, net of allowance for doubtful accounts of $43 at September 30, 2022 and $6 at December 31, 2021		1,554			1,393
Inventories		5,047			4,601
Prepaid expenses and other current assets		652			300
Total current assets		24,595			25,791

Right of use asset		2,449			3,179
Property and equipment, net		574			95
Other assets		333			420
Total assets	$	27,951		$	29,485

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	612		$	1,394
Accrued compensation		1,344			1,609
Series A preferred stock dividends payable		3,382			—
Accrued expenses and other current liabilities		669			718
Leasehold liability, current portion		1,065			985
Total current liabilities		7,072			4,706

Borrowings, long-term portion		13,668			12,287
Leasehold liability, long-term portion		1,384			2,194
Other long-term liabilities		881			575
Total liabilities		23,005			19,762

Commitments and contingencies (Note 6)

Stockholders’ equity:
Convertible preferred stock issuable in series, par value of $0.001;
Shares authorized: 5,000,000 at September 30, 2022 and December 31, 2021;
Shares issued and outstanding: 56,451 at September 30, 2022 and December 31, 2021; aggregate liquidation preference of $56,366 at September 30, 2022 and December 31, 2021		—			—
Common stock, par value of $0.001;
Shares authorized: 100,000,000 at September 30, 2022 and December 31, 2021;
Shares issued and outstanding: 7,435,644 and 4,778,263 at September 30, 2022 and December 31, 2021, respectively		7			96
Additional paid-in capital		403,133			394,380
Accumulated deficit		(398,194	)		(384,753	)
Total stockholders’ equity		4,946			9,723
Total liabilities and stockholders’ equity	$	27,951		$	29,485

All share and per share data reflect the impact of the reverse stock split effective March 14, 2022. See accompanying notes.

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,
	2022			2021			2022			2021
Revenues	$	2,252		$	2,366		$	6,272		$	7,727
Cost of revenues		1,462			1,566			4,301			5,015
Gross profit		790			800			1,971			2,712

Operating expenses:
Research and development		1,086			1,397			3,244			4,502
Selling, general and administrative		3,384			3,892			10,862			11,755
Total operating expenses		4,470			5,289			14,106			16,257
Loss from operations		(3,680	)		(4,489	)		(12,135	)		(13,545	)

Interest expense, net		(407	)		(419	)		(1,286	)		(1,214	)
Other (expenses) income, net		—			(4	)		(20	)		2,343
Net loss and comprehensive loss		(4,087	)		(4,912	)		(13,441	)		(12,416	)
Accretion of preferred stock dividends		(1,127	)		(1,044	)		(3,381	)		(3,132	)
Deemed dividend arising from beneficial conversion feature of convertible preferred stock		—			—			(5,111	)		—
Net loss applicable to common stockholders	$	(5,214	)	$	(5,956	)	$	(21,933	)	$	(15,548	)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.77	)	$	(1.25	)	$	(3.78	)	$	(3.31	)
Weighted average common shares used to compute net loss per share, basic and diluted		6,798			4,769			5,804			4,704

All share and per share data reflect the impact of the reverse stock split effective March 14, 2022. See accompanying notes.

AVINGER, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(In thousands, except share data)

	Convertible Preferred Stock				Common Stock				Additional Paid-in			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance at June 30, 2021		52,276	$	—		4,767,650	$	95	$	392,032		$	(374,845	)	$	17,282
Issuance of common stock under officers and directors purchase plan and vesting of restricted stock units		—		—		10,498		1		—			—			1
Employee stock-based compensation		—		—		—		—		239			—			239
Accretion of Series A preferred stock dividends		—		—		—		—		(1,044	)		—			(1,044	)
Net and comprehensive loss		—		—		—		—		—			(4,912	)		(4,912	)
Balance at September 30, 2021		52,276	$	—		4,778,148	$	96	$	391,227		$	(379,757	)	$	11,566

	Convertible Preferred Stock				Common Stock				Additional Paid-in			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Equity
Balance at June 30, 2022		56,451	$	—		6,081,333	$	6	$	399,422		$	(394,107	)	$	5,321
Issuance of common stock in public offerings, net of commissions and issuance costs		—		—		959,137		1		4,799			—			4,800
Exercise of pre-funded warrants for common stock		—		—		387,019		—		—			—			—
Issuance of common stock upon vesting of restricted stock units		—		—		8,155		—		—			—			—
Employee stock-based compensation		—		—		—		—		39			—			39
Accretion of Series A preferred stock dividends		—		—		—		—		(1,127	)		—			(1,127	)
Net and comprehensive loss		—		—		—		—		—			(4,087	)		(4,087	)
Balance at September 30, 2022		56,451	$	—		7,435,644	$	7	$	403,133		$	(398,194	)	$	4,946

All share and per share data reflect the impact of the reverse stock split effective March 14, 2022. See accompanying notes.

AVINGER, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(unaudited)

(In thousands, except share data)

	Convertible Preferred Stock					Common Stock				Additional Paid-in			Accumulated			Total Stockholders’
	Shares			Amount		Shares		Amount		Capital			Deficit			Equity
Balance at December 31, 2020		52,369		$	—		4,246,306	$	85	$	380,332		$	(367,341	)	$	13,076
Issuance of common stock in public offerings, net of commissions and issuance costs		—			—		500,000		10		13,067			—			13,077
Conversion of Series B preferred stock into common stock		(93	)		—		18,600		—		—			—			—
Issuance of common stock under officers and directors purchase plan and vesting of restricted stock units		—			—		13,242		1		—			—			1
Employee stock-based compensation		—			—		—		—		960			—			960
Accretion of Series A preferred stock dividends		—			—		—		—		(3,132	)		—			(3,132	)
Net and comprehensive loss		—			—		—		—		—			(12,416	)		(12,416	)
Balance at September 30, 2021		52,276		$	—		4,778,148	$	96	$	391,227		$	(379,757	)	$	11,566

	Convertible Preferred Stock					Common Stock					Additional Paid-in			Accumulated			Total Stockholders’
	Shares			Amount		Shares		Amount			Capital			Deficit			Equity
Balance at December 31, 2021		56,451		$	—		4,778,263	$	96		$	394,380		$	(384,753	)	$	9,723
Issuance of common stock in public offerings, net of commissions and issuance costs		—			—		1,285,603		2			5,194			—			5,196
Issuance of Series D preferred stock, net of commissions and issuance costs		7,600			—		—		—			6,721			—			6,721
Conversion of Series D preferred stock into common stock		(7,600	)		—		950,000		1			—			—			1
Exercise of pre-funded warrants for common stock		—			—		387,019		—			—			—			—
Reclassifications and adjustments due to rounding impact from reverse stock split for fractional shares		—			—		26,169		(92	)		92			—			—
Issuance of common stock upon vesting of restricted stock units		—			—		8,590		—			—			—			—
Employee stock-based compensation		—			—		—		—			127			—			127
Accretion of Series A preferred stock dividends		—			—		—		—			(3,381	)		—			(3,381	)
Net and comprehensive loss		—			—		—		—			—			(13,441	)		(13,441	)
Balance at September 30, 2022		56,451		$	—		7,435,644	$	7		$	403,133		$	(398,194	)	$	4,946

All share and per share data reflect the impact of the reverse stock split effective March 14, 2022. See accompanying notes.

AVINGER, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities
Net loss	$	(13,441	)	$	(12,416	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		133			525
Amortization of debt issuance costs and debt discount		63			65
Stock-based compensation		127			960
Noncash interest expense and other charges		1,318			1,151
Change in right of use asset		72			102
Provision for excess and obsolete inventories		156			97
Other non-cash charges		37			3
Gain on extinguishment of debt		—			(2,353	)
Changes in operating assets and liabilities:
Accounts receivable		(198	)		82
Inventories		(1,182	)		(733	)
Prepaid expenses and other current assets		(352	)		(318	)
Other assets		15			(44	)
Accounts payable		(783	)		484
Accrued compensation		(265	)		(324	)
Accrued expenses and other current liabilities		(49	)		122
Other long-term liabilities		306			431
Net cash used in operating activities		(14,043	)		(12,166	)

Cash flows from investing activities
Purchase of property and equipment		(31	)		(18	)
Net cash used in investing activities		(31	)		(18	)

Cash flows from financing activities
Proceeds from the issuance of convertible preferred stock, net of commissions and issuance costs		6,721			—
Proceeds from the issuance of common stock in public offerings, net of commissions and issuance costs		5,198			13,077
Net cash provided by financing activities		11,919			13,077

Net change in cash and cash equivalents		(2,155	)		893
Cash and cash equivalents, beginning of period		19,497			22,185
Cash and cash equivalents, end of period	$	17,342		$	23,078

Supplemental disclosure of cash flow information
Noncash investing and financing activities:
Accretion of Series A preferred stock dividends	$	3,381		$	3,132
Reclassification of right of use asset to prepaid rent	$	(72	)	$	(102	)
Transfers between inventory and property and equipment	$	580		$	(7	)

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 and Tigereye, 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 and Pantheris SV, 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

In the course of its activities, the Company has incurred losses and negative cash flows from operations since its inception. As of September 30, 2022, the Company had an accumulated deficit of $398.2 million. The Company expects to incur losses for the foreseeable future. The Company believes that its cash and cash equivalents of $17.3 million at September 30, 2022 and expected revenues from operations will be sufficient to allow the Company to fund its current operations partially through the fourth quarter of 2023. The Company received net proceeds of approximately $4.4 million from the sale of its common stock in August 2022, $0.8 million from the sale of its common stock under an At The Market Offering Agreement during the nine months ended September 30, 2022, $6.7 million from the January 2022 Series D preferred stock equity financing and $13.0 million from the sale of its common stock in February 2021. The Company may seek to raise additional funds in future equity offerings to meet its operational needs and capital requirements for product development, clinical trials and commercialization or other strategic objectives.

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. In addition, the COVID-19 pandemic and responses thereto have resulted in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, restrictions on elective medical procedures, 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.

Public Offerings

Past Offerings

On February 2, 2021, under the shelf registration statement, the Company completed a bought deal offering of 500,000 shares of common stock at an offering price of $28.80 per share. As a result, the Company received aggregate net proceeds of approximately $13.0 million after underwriting discounts, commissions, legal and accounting fees, and other ancillary expenses.

January 2022 Offering

On January 14, 2022, the Company entered into a securities purchase agreement with several institutional investors pursuant to which the Company agreed to sell and issue, in a registered direct offering ( “January 2022 Offering”), an aggregate of 7,600 shares of the Company’s Series D Convertible Preferred Stock, par value of $0.001 per share, at an offering price of $1,000 per share which was convertible into common stock at a conversion price of $8.00 per share. Concurrently, the Company agreed to issue to these investors warrants to purchase up to an aggregate of 807,500 shares of the Company’s common stock (the “Common Warrants”). As a result, the Company received aggregate net proceeds of approximately $6.7 million after underwriting discounts, commissions, legal and accounting fees, and other ancillary expenses.

The 807,500 Common Warrants have an exercise price of $9.60 per share and became exercisable beginning July 14, 2022. The Common Warrants will expire five years following the time they become exercisable, or July 14, 2027. The Company also issued to the Placement Agent or its designees warrants to purchase up to an aggregate of 66,500 shares of common stock (the “Placement Agent Warrants”). The Placement Agent Warrants are subject to the same terms as the Common Warrants, except that the Placement Agent Warrants have an exercise price of $10.00 per share and a term of five years from the commencement of the sales pursuant to the January 2022 Offering, or January 12, 2027.

August 2022 Offering

On August 4, 2022, the Company entered into a securities purchase agreement with a single institutional investor for the issuance and sale of 1,484,019 shares of its common stock in a registered direct offering (“RD” or “Registered Direct”) at a purchase price of $1.752 per share, or pre-funded warrants in lieu thereof. In a concurrent private placement, the Company also agreed to issue and sell to the investor 1,369,864 shares of common stock at the same purchase price as in the registered direct offering, or pre-funded warrants in lieu thereof (“Private Placement” and together with the Registered Direct offering the “August 2022 Offering”). As a result, the Company received aggregate net proceeds of approximately $4.4 million after underwriting discounts, commissions, legal and accounting fees, and other ancillary expenses.

As a result, in the Registered Direct offering, the Company issued (i) 700,000 shares of common stock, (ii) and pre-funded warrants in lieu of common stock to purchase up to an aggregate of 784,019 shares of common stock (the “RD Pre-Funded Warrants”) and in the Private Placement, the Company issued pre-funded warrants to purchase up to an aggregate of 1,369,864 shares of common stock (the “Private Pre-Funded Warrants” and together with the RD Pre-Funded Warrants the “August 2022 Pre-Funded Warrants”).

In addition, the Company issued to the investor in the August 2022 Offering Series A preferred investment options to purchase up to 2,853,883 additional shares of the Company’s common stock and Series B preferred investment options to purchase up to 2,853,883 additional shares of the Company’s common stock (the “Preferred Investment Options”). The Series A preferred investment options have an exercise price of $1.502 per share, are immediately exercisable, and will expire five and one-half years from the date of issuance, or February 8, 2028, and the Series B preferred investment options have an exercise price of $1.502 per share, are immediately exercisable, and will expire two years from the date of issuance, or August 8, 2024. The Company also issued to the Placement Agent or its designees preferred investment options to purchase up to an aggregate of 171,233 shares of common stock (the “Placement Agent Preferred Investment Options”). The Placement Agent Preferred Investment Options are subject to the same terms as the Preferred Investment Options, except that the Placement Agent Preferred Investment Options have an exercise price of $2.19 per share and a term of five years from the commencement of the sales pursuant to the August 2022 Offering, or August 3, 2027.

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 $0.001 per share (the “Shares”) up to an aggregate offering price of $7,000,000 from time to time, in an at the market public offering. Sales of the Shares are to be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. The Agent will receive a commission from the Company of 3.0% of the gross proceeds of any Shares sold under the ATM Agreement. The Shares sold under the ATM Agreement are offered and sold pursuant to the Company’s shelf registration statement on Form S-3, which was initially filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2022 and declared effective on April 7, 2022, and a prospectus supplement and the accompanying prospectus relating to the At The Market Offering filed with the SEC on May 20, 2022. During the quarter ended September 30, 2022, the Company sold 259,137 shares of common stock at an average price of $1.56 per share for aggregate proceeds of $0.4 million, of which approximately $12,000 was paid in the form of commissions to the Agent. During the nine months ended September 30, 2022, the Company sold 585,603 shares of common stock pursuant to the ATM Agreement at an average price of $1.67 per share for aggregate proceeds of $1.0 million, of which approximately $29,000 was paid in the form of commissions to the Agent. Other than the ATM Agreement, the Company currently does not have any commitments to obtain additional funds. On August 3, 2022, the Company suspended sales under the ATM Agreement. While the Company may resume sales in the future, there can be no assurance that the Company will be successful in acquiring additional funding through these means.

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 (“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, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, or for any other interim period or for any future year. The December 31, 2021 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, 2021, which was filed with the SEC on March 22, 2022. 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, 2021.

On March 11, 2022, the Company’s Board of Directors approved an amendment to the Company’s amended and restated certificate of incorporation to effect a 1-for-20 reverse stock split of the Company’s issued and outstanding common stock. The reverse stock split became effective on March 14, 2022. The par value of the common stock was not adjusted as a result of the reverse stock split. All common stock, stock options, restricted stock units, and per share amounts in the financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stock split.

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. 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, 2022 and December 31, 2021.

The Company’s accounts receivable are due from a variety of healthcare organizations in the United States and select international markets. At September 30, 2022, there was one customer that represented 11% of the Company’s accounts receivable. At December 31, 2021, there was one customer that represented 21% of the Company’s accounts receivable. For the three and nine months ended September 30, 2022, there was one customer that represented 11% and 13% of revenues, respectively. For the three and nine months ended September 30, 2021, there were no customers that represented 10% or more of revenues. Disruption of sales orders or a deterioration of financial condition of customers would have a negative impact on the Company’s financial position and results of operations.

The Company believes COVID-19 and the subsequent burdens on the hospital systems has had and will continue to have an adverse effect on its ability to generate sales due to the fluctuating and unpredictable levels of capacity medical providers have to perform procedures that require the use of its products.

The Company is closely monitoring general economic conditions on global supply chain, manufacturing, and logistics operations. As inflationary pressures increase, the Company anticipates that its production and operating costs may similarly increase, including costs and availability of materials and labor. While the Company has sufficient inventory on-hand to meet its current production requirements and customer demand, it has experienced some constraints with respect to the availability of certain materials and extended lead times from certain key suppliers. The Company has also experienced some delays in shipping products to its customers. Any significant delay or interruption in our supply chain could impair the Company’s ability to meet the demands of its customers in the future and could harm its business.

Product Warranty Costs

The Company typically offers a one-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,
	2022			2021			2022			2021
Beginning balance	$	137		$	231		$	187		$	193
Warranty provision		6			5			10			46
Usage/Release		(34	)		(40	)		(88	)		(43	)
Ending balance	$	109		$	196		$	109		$	196

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, 2022 and 2021, there were no 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 attributable to common stockholders was determined as follows (in thousands, except per share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net loss applicable to common stockholders	$	(5,214	)	$	(5,956	)	$	(21,933	)	$	(15,548	)
Weighted average common stock outstanding, basic and diluted		6,798			4,769			5,804			4,704
Net loss per share attributable to common stockholders, basic and diluted	$	(0.77	)	$	(1.25	)	$	(3.78	)	$	(3.31	)

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,
	2022		2021		2022		2021
Common stock warrants equivalents		5,541,377		134,109		2,490,263		136,489
Common stock options		303		303		303		285
Convertible preferred stock		56,451		52,276		58,562		52,293
Unvested restricted stock units		7,230		18,986		8,718		20,401
		5,605,361		205,674		2,557,846		209,468

Segment and Geographical Information

The Company operates and manages its business as one reportable and operating segment. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. Primarily all of the Company’s long-lived assets, which are comprised of property and equipment, are based in the United States. For the three months ended September 30, 2022 and 2021, 95% and 94%, respectively, of the Company’s revenues were in the United States. For the nine months ended September 30, 2022 and 2021, 93% and 94%, respectively, of the Company’s revenues were in the United States based on the shipping location of the external customer.

As of September 30, 2022 and December 31, 2021, cash equivalents were all categorized as Level 1 and consisted of money market funds. As of September 30, 2022 and December 31, 2021, 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, 2022.

Recent Accounting Pronouncements

Recently adopted accounting standards

In May 2021, ASU No. 2021-04, Issuer’s Accounting for Certain Modifications of Exchanges of Freestanding Equity-Classified Written Call Options was issued to clarify the accounting for modifications or exchanges of freestanding equity-classified written call options, such was warrants, that remain equity classified after modification or exchange. The standard was adopted by the Company on January 1, 2022. This new standard did not have a material impact on the Company’s financial statements.

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 ASC 815 or (ii) a convertible debt instrument was issued at a substantial premium. The standard becomes effective for the Company, as a smaller reporting company as defined by the SEC, in the first quarter of 2024 and early adoption is permitted. 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,
	2022		2021
Raw materials	$	2,863	$	2,503
Work-in-process		333		1
Finished products		1,851		2,097
Total inventories	$	5,047	$	4,601

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 $50 million in principal amount from CRG on or before March 29, 2017. The Company borrowed $30 million on September 22, 2015. The Company borrowed an additional $10 million on June 15, 2016 under the Loan Agreement.

On February 14, 2018, the Company and CRG further amended the Loan Agreement concurrent with the conversion of $38 million of the principal amount of the senior secured term loan (plus $3.8 million in back-end fees and prepayment premium applicable thereto) into a newly authorized Series A convertible preferred stock (see below).

The Company has entered into several amendments to the Loan Agreement (the “Amendments”) with CRG since September 2015, the most recent of which was entered into on August 10, 2022. The Amendments, among other things: (1) extended the interest-only period through December 31, 2023; (2) extended the period during which the Company may elect to pay a portion of interest in payment-in-kind, or PIK, interest payments through December 31, 2023 so long as no default has occurred and is continuing; (3) permitted the Company to make our entire interest payments in PIK interest payments for through December 31, 2023 so long as no default has occurred and is continuing; (4) extended the maturity date to December 31, 2025; (5) reduced the minimum liquidity requirement to $3.5 million at all times; (6) eliminated the minimum revenue covenant for 2018, 2019 and 2020; (7) reduced the minimum revenue covenant to $8 million for 2022, (8) added minimum revenue covenants of $10 million for 2023, $14.5 million for 2024 and $17 million for 2025; (9) changed the date under the on-going stand-alone representation regarding no “Material Adverse Change” to December 31, 2020; (10) amended the on-going stand-alone representation and stand-alone event of default regarding Material Adverse Change such that any adverse change in or effect upon the revenue of the Company and its subsidiaries due to the outbreak of COVID-19 will not constitute a Material Adverse Change; and (11) provided CRG with board observer rights.

Under the amended Loan Agreement, no cash payments for either principal or interest are due until the first quarter of 2024. 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 12.5%. Beginning in the first quarter of 2024, the Company will be required to make quarterly principal payments (in addition to the interest) of $1.9 million with total principal payments of $7.5 million in 2024 and $7.5 million in 2025. The maturity date of the Loan is December 31, 2025.

The Company may voluntarily prepay the borrowings in full, with a prepayment premium beginning at 5.0% and declining by 1.0% annually thereafter, with no premium being payable if prepayment occurs after seven and half years of the loan. Each tranche of borrowing required the payment, on the borrowing date, of a financing fee equal to 1.5% of the borrowed loan principal, which is recorded as a discount to the debt. In addition, a facility fee equal to 15.0% of the amounts borrowed plus any PIK is to be payable at the end of the term or when the borrowings are repaid in full. A long-term liability is being accreted using the effective interest method for the facility fee over the term of the Loan Agreement with a corresponding discount to the debt. The borrowings are collateralized by a security interest in substantially all of the Company’s assets.

The Loan Agreement requires that the Company adheres to certain affirmative and negative covenants, including financial reporting requirements, certain minimum financial covenants for pre-specified liquidity and revenue requirements 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 $3.5 million of cash and certain cash equivalents, and the Company has to achieve certain minimum revenues. If the Company fails to meet the applicable minimum revenue target in any calendar year, the Loan Agreement provides the Company with a cure right if it prepays a portion of the outstanding principal equal to 2.0 times the revenue shortfall. In addition, the Loan Agreement prohibits the payment of cash dividends on the Company’s capital stock and also places restrictions on mergers, sales of assets, investments, incurrence of liens, incurrence of indebtedness and transactions with affiliates. CRG may accelerate the payment terms of the Loan Agreement upon the occurrence of certain events of default set forth therein, which include the failure of the Company to make timely payments of amounts due under the Loan Agreement, the failure of the Company to adhere to the covenants set forth in the Loan Agreement, the insolvency of the Company or upon the occurrence of a material adverse change.

As of September 30, 2022, the Company was in compliance with all applicable covenants under the Loan Agreement.

As of September 30, 2022, principal, final facility fee and PIK payments under the Loan Agreement, which incorporates all aforementioned amendments, were as follows (in thousands):

Year Ending December 31,
2022 (remaining three months of the year)	$	—
2023		—
2024		9,045
2025		10,339
		19,384
Less: Amount of PIK additions and final facility fee to be incurred subsequent to September 30, 2022		(5,446	)
Less: Amount representing debt issuance costs		(270	)
Borrowings, long term portion, as of September 30, 2022	$	13,668

In connection with drawdowns under the Loan Agreement, the Company recorded aggregate debt discounts of $1.3 million as contra-debt. The debt discounts are being amortized as non-cash interest expense using the effective interest method over the term of the Loan Agreement. As of September 30, 2022 and December 31, 2021, the balance of the aggregate debt discount was approximately $270,000 and $333,000, respectively. The Company’s interest expense associated with the amortization of debt discount was approximately $21,000 during both the three months ended September 30, 2022 and 2021, respectively. The Company’s interest expense associated with the amortization of debt discount was approximately $63,000 and $65,000 during the nine months ended September 30, 2022 and 2021, respectively. For the three months ended September 30, 2022 and 2021, the Company incurred interest expense of approximately $480,000 and $419,000, respectively. For the nine months ended September 30, 2022 and 2021, the Company incurred interest expense of approximately $1.4 million and $1.2 million, respectively.

As of September 30, 2022, all of the CRG borrowings and associated aggregate debt discount were classified as non-current.

Paycheck Protection Program

On April 23, 2020, the Company received loan proceeds of $2.3 million (the “PPP Loan”) pursuant to the PPP under the CARES Act.

The PPP Loan, which was in the form of a promissory note, dated April 20, 2020 (the “Promissory Note”), between the Company and Silicon Valley Bank (“SVB”) as the lender, was set to mature on April 20, 2022 and bore interest at a fixed rate of 1% per annum, payable monthly commencing six months from the date of the Loan, with prepayment of the borrowings permitted with no associated penalty or premium.

The PPP Loan was administered by the U.S. Small Business Administration (“SBA”). The SBA was given the authority under the PPP to forgive loans if all employees were kept on the payroll for a required period and the loan proceeds were used for payroll, rent and utilities. The Company applied for debt forgiveness in December 2020.

On April 17, 2021, the Company was notified by SVB that its PPP Loan had been fully forgiven by the SBA and that there was no remaining balance on the PPP Loan. The Company recorded the forgiveness as other income in April 2021 in the amount of $2.4 million, of which approximately $23,000 was accrued interest. For the nine months ended September 30, 2021, the Company incurred interest expense of approximately $7,000 related to the PPP Loan.

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 lease includes a rent holiday concession and escalation clauses for increased rent over the lease term. Rent expense is recognized using the straight-line method over the term of the lease. The Company records deferred rent calculated as the difference between rent expense and the cash rental payments.

The lease will expire on November 30, 2024. The Company is obligated to pay approximately $5.8 million in base rent payments through November 2024, beginning on December 1, 2019. The weighted average remaining lease term as of September 30, 2022 is 2.2 years.

The operating lease was included on the balance sheet at the present value of the future base payments discounted at a 6.5% discount rate using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment as the lease does provide an implicit rate.

The Company’s operating lease expense, excluding variable maintenance fees and other expenses on a monthly basis, was approximately $105,000. Rent expense for both the three months ended September 30, 2022 and 2021 was approximately $314,000. Rent expense for both the nine months ended September 30, 2022 and 2021 was approximately $942,000. The Company’s variable expenses for the three months ended September 30, 2022 and 2021 were approximately $63,000 and $59,000, respectively. The Company’s variable expenses for the nine months ended September 30, 2022 and 2021 were approximately $200,000 and $177,000, respectively. Operating right-of-use asset amortization for the three months ended September 30, 2022 and 2021 was approximately $271,000 and $256,000, respectively. Operating right-of-use asset amortization for the nine months ended September 30, 2022 and 2021 was approximately $802,000 and $758,000, respectively. Due to payments being made in excess of operating lease expense recognized, the Company recorded approximately $86,000 and $158,000 as prepaid rent included in other assets on the condensed balance sheet as of September 30, 2022 and December 31, 2022, respectively.

The following table presents the future operating leasehold payments and lease liability included on the balance sheet related to the Company’s operating lease as of September 30, 2022 (in thousands):

Year Ending December 31,
2022 (remaining three months of the year)	$	293
2023		1,203
2024		1,138
		2,634
Less: Imputed interest		(185	)
Leasehold liability as of September 30, 2022	$	2,449

The following table shows right of use (“ROU”) assets and lease liabilities, and the associated financial statement line items, as of September 30, 2022 and December 31, 2021 (in thousands):

Lease-Related Assets and Liabilities	Financial Statement Line Items	September 30, 2022		December 31, 2021
Right of use assets:
Operating lease	Right of use asset	$	2,449	$	3,179
Total right of use assets		$	2,449	$	3,179
Lease liabilities:
Operating lease	Leasehold liability, current portion	$	1,065	$	985
	Leasehold liability, long-term portion		1,384		2,194
Total lease liabilities		$	2,449	$	3,179

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 $1.5 million as of September 30, 2022. The majority of this amount is related to commitments to purchase inventory components for our various product lines.

Legal Proceedings

The Company is not currently involved in any pending legal proceedings that the Company 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, 2022 and December 31, 2021, the Company’s certificate of incorporation, as amended and restated, authorizes the Company to issue up to 5,000,000 shares of convertible preferred stock with $0.001 par value per share. As of both September 30, 2022 and December 31, 2021, 56,451 shares were issued and outstanding.

Series A Convertible Preferred Stock

The holders of Series A preferred stock are entitled to receive annual accruing dividends at a rate of 8%, payable in additional shares of Series A preferred stock or cash, at the Company’s option. The shares of Series A preferred stock have a liquidation preference of $1,000 per share, no voting rights and rank senior to all other classes and series of the Company’s equity in terms of repayment and certain other rights. During the year ended December 31, 2021, 4,175 additional shares were issued to CRG as payment of dividends. As of September 30, 2022 and December 31, 2021, 56,366 shares of Series A preferred stock were outstanding, which are currently convertible into shares of the Company’s common stock at $400 per share. The Series A preferred stock accrued additional dividends of approximately $1.1 million and $1.0 million during the quarters ended September 30, 2022 and 2021, respectively and approximately $3.4 million and $3.1 million during the nine months ended September 30, 2022 and 2021, respectively.

Series B Convertible Preferred Stock

The Series B preferred stock has a liquidation preference of $0.001 per share, full ratchet price based anti-dilution protection, has no voting rights and is subject to certain ownership limitations. The Series B preferred stock is immediately convertible at the option of the holder, has no stated maturity, and does not pay regularly stated dividends or interest. During the year ended December 31, 2021, 93 of these shares converted into 18,600 shares of common stock. As of September 30, 2022 and December 31, 2021, 85 shares of Series B preferred stock remained outstanding, which are currently convertible into shares of the Company’s common stock at $5 per share.

Series D Convertible Preferred Stock

On January 14, 2022, the Company entered into a security purchase agreement with several institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering ( “January 2022 Offering”), an aggregate of 7,600 shares of the Company’s Series D convertible preferred stock, par value $0.001 per share at an offering price of $1,000 per share. Concurrently, the Company agreed to issue to these investors warrants to purchase up to an aggregate of 807,500 shares of the Company’s common stock (the “Common Warrants”). The shares of Series D preferred stock had a stated value of $1,000 per share and were convertible into an aggregate of 950,000 shares of common stock at a conversion price of $8.00 per share. During the nine months ended September 30, 2022, all 7,600 shares of Series D preferred stock were converted into a total of 950,000 shares of common stock. Consequently, there were no shares of Series D preferred stock outstanding as of September 30, 2022.

At the time of issuance, the Company evaluated the classification of the Series D preferred stock and determined equity classification was appropriate due to no mandatory or contingently redeemable redemption features. The warrants issued to the investors were considered freestanding equity classified instruments. The Company first allocated gross proceeds from the registered direct offering between the preferred stock and the warrants issued to investors using a relative fair value approach, resulting in an initial allocation to each instrument of $4,009 and $3,591, respectively. On the issuance date, the Company estimated the fair value of the Common Warrants issued to investors and warrants issued to the placement agent designees using a Black-Scholes option pricing model using the following assumptions: (i) contractual term of 5.5 years, (ii) expected volatility rate of 136.61%, (iii) risk-free interest rate of 1.51%, (iv) expected dividend rate of 0%, and (v) closing price of the Company’s common stock of the day immediately preceding the registered direct offering. The fair value of preferred stock was estimated based upon equivalent common shares that preferred stock could have been converted into at the closing price of the day immediately preceding the purchase date.

The embedded conversion feature was evaluated and bifurcation from the preferred stock equity host was not considered necessary. The issuance of the Series D convertible preferred stock generated a beneficial conversion feature (“BCF”) which arose as the equity security was issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective conversion price that is less than the market price of the underlying stock at the commitment date. The Company recorded the BCF as a discount to the preferred stock resulting in the amount of $5,111 based on the intrinsic value of the beneficial conversion. As the preferred stock was immediately convertible into common stock subject to the consummation of the reverse stock split on March 14, 2022, a deemed dividend related to the discount associated with the beneficial conversion feature was recorded on that date. This one-time, non-cash charge impacted net loss applicable to common stockholders and net loss per share attributable to common stockholders for the nine months ended September 30, 2022.

Common Stock

As of September 30, 2022, the Company’s certificate of incorporation, as amended and restated, authorizes the Company to issue up to 100,000,000 shares of common stock with $0.001 par value per share, of which 7,435,644 shares were issued and outstanding.

Common Stock Warrants

As of December 31, 2021, 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		8,979,000		44,895	$	400.00	February 2025
Series 2 Warrants issued in the February 2018 Series B financing		8,709,500		43,548	$	400.00	February 2025
Warrants issued in the November 2018 financing		8,768,395		43,842	$	80.00	November 2023
Total as of December 31, 2021		26,456,895		132,265

As of September 30, 2022, 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		8,979,000		44,895	$	400.00	February 2025
Series 2 Warrants issued in the February 2018 Series B financing		8,709,500		43,548	$	400.00	February 2025
Warrants issued in the November 2018 financing		8,768,395		43,842	$	80.00	November 2023
Placement agent warrants issued in the January 2022 financing		1,330,000		66,500	$	10.00	January 2027
Warrants issued in the January 2022 financing		16,150,000		807,500	$	9.60	July 2027
Pre-funded warrants issued in the August 2022 financing		1,766,864		1,766,864	$	0.0001		n/a
Series A Private Investment Options issued in August 2022 financing		2,853,883		2,853,883	$	1.502	February 2028
Series B Private Investment Options issued in August 2022 financing		2,853,883		2,853,883	$	1.502	August 2024
Placement agent Private Investment Options issued in the August 2022 financing		171,233		171,233	$	2.19	August 2027
Total as of September 30, 2022		51,582,758		8,652,148

January 2022 Offering

Pursuant to a purchase agreement entered into on January 14, 2022, the Company issued warrants to purchase up to an aggregate of 807,500 shares of the Company’s common stock at an exercise price of $9.60 per share and which became exercisable beginning July 14, 2022. The Common Warrants will expire five years following the time they become exercisable, or July 14, 2027.

The Company issued to the placement agent of the January 2022 Offering warrants to purchase up to an aggregate of 66,500 shares of common stock (the “Placement Agent Warrants”). The Placement Agent Warrants are subject to the same terms as the Common Warrants, except that the Placement Agent Warrants have an exercise price of $10.00 per share and a term of five years from the commencement of the sales pursuant to the January 2022 Offering, or January 12, 2027.

August 2022 Offering

Pursuant to a purchase agreement entered into on August 4, 2022, the Company issued RD Pre-Funded Warrants to purchase up to 784,019 shares of common stock and Private Pre-Funded Warrants to purchase up to 1,369,864 shares of common stock. The August 2022 Pre-Funded Warrants have an exercise price of $0.0001 per share, are immediately exercisable, and have no expiration date. During the three months ended September 30, 2022, 387,019 of shares of RD Pre-Funded Warrants were exercised into the equivalent number of the Company’s common stock. As of September 30, 2022, Pre-Funded Warrants exercisable for 1,766,864 shares of the Company’s common stock remained outstanding.

The Company issued Series A preferred investment options to purchase up to 2,853,883 additional shares of the Company’s common stock and Series B preferred investment options to purchase up to 2,853,883 additional shares of the Company’s common stock, collectively referred to as Preferred Investment Options. The Series A preferred investment options have an exercise price of $1.502 per share, are immediately exercisable, and will expire five and one-half years from the date of issuance, or February 8, 2028, and the Series B preferred investment options have an exercise price of $1.502 per share, are immediately exercisable, and will expire two years from the date of issuance, or August 8, 2024.

The Company issued to the placement agent of the August 2022 Offering preferred investment options to purchase up to 171,233 shares of common stock (the “Placement Agent Preferred Investment Options”). The Placement Agent Preferred Investment Options are subject to the same terms as the Preferred Investment Options, except that the Placement Agent Preferred Investment Options have an exercise price of $2.19 per share and a term of five years from the commencement of the sales pursuant to the August 2022 Offering, or August 3, 2027.

The exercise price and the number of shares of common stock issuable upon exercise of each Common Warrants, Pre-Funded Warrants, Preferred Investment Options, and Placement Agent Preferred Investment Options 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 Common Warrants, Pre-Funded Warrants, Preferred Investment Options, or Placement Agent Preferred Investment Options 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 Common Warrants, Pre-Funded Warrants, Preferred Investment Options, or Placement Agent Preferred Investment Options immediately prior to the fundamental transaction.

The Common Warrants, Pre-Funded Warrants, Preferred Investment Options, and Placement Agent Preferred Investment Options can be exercised at the option of the holders at any time after they become exercisable provided that shares of the Common Warrants, Pre-Funded Warrants, Preferred Investment Options, or Placement Agent Preferred Investment Options cannot be exercised into common stock if the applicable holder would beneficially own in excess of 4.99% (or, upon election by such holder prior to the issuance of any shares of Common Warrants, Pre-Funded Warrants, Preferred Investment Options, or Placement Agent Preferred Investment Options, 9.99%) of the Company’s outstanding common stock immediately after giving effect to the exercise. A holder of the Common Warrants, Pre-Funded Warrants, Preferred Investment Options or Placement Agent Preferred Investment Options may, upon notice to the Company, increase or decrease such beneficial ownership limitation, but not in excess of 9.99%.

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 Common Warrants, Preferred Investment Options, and Placement Agent Preferred Investment Options from the holder by paying to the holder an amount, in cash, equal to the fair value of the remaining unexercised portion of the Common Warrants, Preferred Investment Options, and Placement Agent Preferred Investment Options on the date of such fundamental transaction, subject to certain limitations in the event of a fundamental transaction not within our control.

As of September 30, 2022 and December 31, 2021, warrants and preferred investment options to purchase an aggregate of 8,652,148 and 132,265 shares of common stock were outstanding, respectively, all of which were classified within the equity section of the respective balance sheets.

Stock Plans

In January 2015, the Board of Directors adopted, and the Company’s stockholders approved the 2015 Equity Incentive Plan (“2015 Plan”). On October 14, 2022, the Company’s stockholders approved an additional 1,750,000 shares of common stock for issuance under the 2015 Plan. As of September 30, 2022, 9,566 shares were available for grant under the 2015 Plan.

The Company’s RSUs generally vest annually over three years in equal increments. The Company measures the fair value of RSUs using the closing stock price of a share of the Company’s common stock on the grant date and is recognized as expense on a straight-line basis over the vesting period of the award. A summary of all RSU activity is presented below:

	Number of Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term
Awards outstanding at December 31, 2021		10,060		$	24.39		0.72
Awarded		—		$	—		—
Released		(8,590	)	$	25.02		—
Forfeited		(1,053	)	$	24.25		—
Awards outstanding at September 30, 2022		417		$	11.64		0.42

As of September 30, 2022, there was less than $0.1 million of remaining unamortized stock-based compensation expense associated with RSUs, which will be expensed over a weighted average remaining service period of approximately 0.4 years. The outstanding non-vested and expected to vest RSUs have an aggregate fair value of less than $0.1 million. The Company used the closing market price of $1.15 per share at September 30, 2022, to determine the aggregate fair value for the RSUs outstanding at that date. For the nine months ended September 30, 2022 and 2021, the fair value of RSUs vested was approximately $14,000 and $0.3 million, respectively. Stock-based compensation expense recognized associated with RSUs vested for the three months ended September 30, 2022 and 2021, was $39,000 and $0.2 million, respectively. Stock-based compensation expense recognized associated with RSUs vested for the nine months ended September 30, 2022 and 2021 was $0.1 million and $1.0 million, respectively.

2018 Officer and Director Share Purchase Plan

There was no common stock issued under the Company’s Officer and Director Share Purchase Plan (“ODPP”) during either the nine months ended September 30, 2022 or 2021. On May 16, 2022, the Board of Directors of the Company terminated the Amended and Restated Officer and Director Share Purchase Plan due to the administrative costs of maintaining such plan and the limited amount of remaining shares. Consequently, there are no longer any shares reserved for issuance under this plan.

8. Stock-Based Compensation

Total noncash stock-based compensation expense relating to the Company’s stock options and RSUs recognized during the three and nine months ended September 30, 2022 and 2021, is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of revenues	$	4	$	24	$	18	$	93
Research and development expenses		11		78		37		274
Selling, general and administrative expenses		24		137		72		593
	$	39	$	239	$	127	$	960

9. Subsequent Events

On October 14, 2022, the Company, held its 2022 Annual Meeting of Shareholders (the “2022 Annual Meeting”) and the shareholders of the Company approved an amendment to the 2015 Plan to (i) increase the number of shares reserved for issuance under the 2015 Plan by 1,750,000 shares and (ii) remove provisions providing for the automatic annual increase in the shares reserved for issuance under the 2015 Plan. The Company’s Board of Directors approved the 2015 Plan amendment on April 5, 2022. With shareholder approval obtained, the 2015 Plan, as amended, became effective as of October 14, 2022. Subject to adjustment in certain circumstances, the 2015 Plan, as amended, authorizes up to 1,805,839 shares of common stock for issuance. Any employee, officer, non-employee director, consultant, independent contractor, or advisor of the Company or any of its subsidiaries or affiliates is eligible to receive an award under the 2015 Plan.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions, that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on March 22, 2022 titled “Risk Factors.”

Overview

We are a commercial-stage medical device company that designs, manufactures and sells real-time image-guided, minimally invasive catheter-based systems that are used by physicians to treat patients with peripheral artery disease, or 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. Our mission is to significantly improve the treatment of vascular disease through the introduction of products based on our Lumivascular platform, the only intravascular real-time image-guided system available in this market.

We design, manufacture, and sell a suite of products in the United States and select international markets. We are located in Redwood City, California. Our current Lumivascular platform consists of products including our Lightbox imaging console, the Ocelot and Tigereye family of catheters, which are image-guided catheters designed to allow physicians to penetrate a total blockage in an artery, known as a chronic total occlusion, or CTO, and the Pantheris family of catheters, our image-guided atherectomy catheters which are designed to allow physicians to precisely remove arterial plaque in PAD patients.

We are in the process of developing CTO crossing devices to target the coronary CTO market. The market for medical devices in the coronary artery disease (“CAD”) market is highly competitive, dynamic, and marked by rapid and substantial technological development and product innovation and there is no guarantee that we will be successful in developing and marketing any new CAD product. We are working on understanding market requirements and beginning the development process for the new CAD product. We anticipate that we will incur additional expenses as we continue to evaluate and develop potential CAD products.

We received CE Marking for our original Ocelot product in September 2011 and received from the U.S. Food and Drug Administration, or FDA, 510(k) clearance in November 2012. We received 510(k) clearance from the FDA for commercialization of Pantheris in October 2015. We received an additional 510(k) clearance for an enhanced version of Pantheris in March 2016 and commenced sales of Pantheris in the United States and select European countries promptly thereafter. In May 2018, we received 510(k) clearance from the FDA for our current next-generation version of Pantheris. In April 2019, we received 510(k) clearance from the FDA for our Pantheris SV, a version of Pantheris targeting smaller vessels, and commenced sales in July 2019. In September 2020, we received 510(k) clearance of Tigereye, a next-generation CTO crossing system utilizing Avinger’s proprietary image-guided technology platform. Tigereye is a product line extension of Avinger’s Ocelot family of image-guided CTO crossing catheters. In January 2022, we received 510(k) clearance from the FDA for our Lightbox 3 imaging console, a version of our Lightbox presenting significant reductions in size, weight and cost in comparison to the incumbent version.

In July 2022, we submitted a 510(k) application to the FDA for the Tigereye ST catheter, a next generation CTO crossing system. Tigereye ST is a line extension of our Ocelot and Tigereye family of CTO crossing catheters. This new image-guided catheter has an integrated outer spinning tip that pairs with the rotation of the inner tip to penetrate challenging blockages and CTO caps. Tigereye ST incorporates an advanced shaft design for pushability and torque response and a three-marker system, similar to Ocelot's, to facilitate consistent image interpretation across the platform. Tigereye ST continues to provide the high definition, real-time intravascular imaging, user-controlled deflectable tip, and faster rotational speeds introduced to Avinger's CTO portfolio with the commercial launch of Tigereye in early 2021. The low-profile Tigereye ST has a working length of 140 cm and 5 French sheath.

Current treatments for PAD, including bypass surgery, can be costly and may result in complications, high levels of post-surgery pain, and lengthy hospital stays and recovery times. Minimally invasive, or endovascular, treatments for PAD include stenting, angioplasty, and atherectomy, which is the use of a catheter-based device for the removal of plaque. These treatments all have limitations in their safety or efficacy profiles and frequently result in recurrence of the disease, also known as restenosis. We believe one of the main contributing factors to high restenosis rates for PAD patients treated with endovascular technologies is the amount of vascular injury that occurs during an intervention. Specifically, these treatments often disrupt the membrane between the outermost layers of the artery, which is referred to as the external elastic lamina, or EEL.

We believe our Lumivascular platform is the only technology that offers real-time visualization of the inside of the artery during PAD treatment through the use of optical coherence tomography, or OCT, a high resolution, light-based, radiation-free imaging technology. Our Lumivascular platform provides physicians with real-time OCT images from the inside of an artery, and we believe Ocelot and Pantheris are the first products to offer intravascular visualization during CTO crossing and atherectomy, respectively. We believe this approach will significantly improve patient outcomes by providing physicians with a clearer picture of the artery using radiation-free image guidance during treatment, enabling them to better differentiate between plaque and healthy arterial structures. Our Lumivascular platform is designed to improve patient safety by enabling physicians to direct treatment towards the plaque, while avoiding damage to healthy portions of the artery.

During the first quarter of 2015, we completed enrollment of patients in VISION, a clinical trial designed to support our August 2015 510(k) submission to the FDA for our Pantheris atherectomy device. VISION was designed to evaluate the safety and efficacy of Pantheris to perform atherectomy using intravascular imaging and successfully achieved all primary and secondary safety and efficacy endpoints. We believe the data from VISION allows us to demonstrate that avoiding damage to healthy arterial structures, and in particular disruption of the external elastic lamina, which is the membrane between the outermost layers of the artery, reduces the likelihood of restenosis, or re-narrowing, of the diseased artery. Although the original VISION study protocol was not designed to follow patients beyond six months, we worked with 18 of the VISION sites to re-solicit consent from previous clinical trial patients in order for them to evaluate patient outcomes through 12 and 24 months following initial treatment. Data collection for the remaining patients from participating sites was completed in May 2017, and we released the final 12- and 24-month results for a total of 89 patients in July 2017.

During the fourth quarter of 2017, we began enrolling patients in INSIGHT, a clinical trial designed to support a submission to the FDA to expand the indication for our Pantheris atherectomy device to include in-stent restenosis. Patient enrollment began in October 2017 and was completed in July 2021. Patient outcomes were evaluated at thirty days, six months and one year following treatment. In November 2021, we received 510(k) clearance from the FDA for a new clinical indication for treating in-stent restenosis with Pantheris using the data collected and analyzed from INSIGHT. We expect this will expand our addressable market for Pantheris to include a high-incidence disease state for which there are few available indicated treatment options.

We are pursuing additional clinical data programs including a post-market study, IMAGE-BTK, that is designed to evaluate the safety and efficacy of Pantheris SV in the treatment of PAD lesions below-the-knee. We are currently enrolling patients, and we expect to complete enrollment in the first half of 2023.

We focus our direct sales force, marketing efforts and promotional activities on interventional cardiologists, vascular surgeons and interventional radiologists. We also work on developing strong relationships with physicians and hospitals that we have identified as key opinion leaders. Although our sales and marketing efforts are directed at these physicians because they are the primary users of our technology, we consider the hospitals and medical centers where the procedure is performed to be our customers, as they typically are responsible for purchasing our products. We are designing additional future products to be compatible with our Lumivascular platform, which we expect to enhance the value proposition for hospitals to invest in our technology. Pantheris qualifies for existing reimbursement codes currently utilized by other atherectomy products, further facilitating adoption of our products.

We have assembled a team with extensive medical device development and commercialization experience in both start-up and large, multi-national medical device companies. We assemble all of our catheter products at our manufacturing facility but certain critical processes, such as coating and sterilization, are performed by outside vendors. Our Lightbox 3 imaging console is assembled through a qualified contract manufacturer. We expect our current manufacturing facility in California, will be sufficient through at least 2023. We generated revenues of $8.8 million in 2020 and $10.1 million in 2021. The lower revenues in 2020 was primarily due to the adverse effects of COVID-19 on our customers as hospitals deferred elective procedures. Revenues in 2020 and 2021 fluctuated significantly due to COVID-19 and continue to do so in 2022.

Recent Developments

COVID-19 and Hospital Capacity Update

As a result of the effects of the COVID-19 pandemic and hospital staffing shortages, we experienced a significant decline in sales, particularly as individuals, as well as hospitals and other medical providers, deferred elective procedures in response to COVID-19. We have continued to experience fluctuating sales as practitioners in certain jurisdictions were able to perform elective procedures while other jurisdictions were continuing to experience capacity issues. While at present, a majority of jurisdictions have eased restrictions on performing elective procedures, we cannot be certain that such restrictions will not be adopted again in the future. Some jurisdictions have experienced and continue to experience a resurgence in COVID-19 cases, which could prompt certain hospitals and other medical providers in such areas to again defer elective procedures or further prolong or reinstate existing restrictions on such procedures. If other jurisdictions experience a resurgence in COVID-19 cases, these jurisdictions may also prolong restrictions on elective procedures. Further, hospital staffing shortages, including issues independent of COVID-19-related capacity issues, have had and are likely to continue to have adverse impacts our business and results of operations. This situation has created a significant amount of volatility in the medical industry which makes future developments and results difficult to predict.

We believe COVID-19 and the related burdens on the hospital systems have had and will continue to have an adverse effect on our ability to generate sales due to the fluctuating and unpredictable levels of capacity medical providers have to perform procedures that require the use of our products as was the case during the nine months ended September 30, 2022. Consequently, it is unclear whether any reduction in sales from levels experienced during COVID-19 is temporary and whether such sales may be recoverable in the future. In addition, we have experienced disruptions in our manufacturing and supply chain, as well as delays in site initiation and patient enrollment for our clinical studies. If we are unable to successfully complete these or other clinical studies, our business and results of operations could be harmed.

The COVID-19 pandemic, staffing and capacity challenges at hospitals, and responses thereto have resulted 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 us in the future. These and other factors could adversely affect our ability to effectively manage our available cash and other resources.

Global Supply Chain

We are closely monitoring the impacts of the COVID-19 pandemic and general economic conditions on global supply chain, manufacturing, and logistics operations. As inflationary pressures increase, we anticipate that our production and operating costs may similarly increase, including costs and availability of materials and labor. In addition, COVID-19 and other events, including port closures or labor shortages, have resulted in manufacturing and shipping constraints generally. While we have had sufficient inventory on-hand to meet our current production requirements and customer demand, we have experienced some constraints with respect to the availability of certain materials and extended lead times from certain key suppliers. We have also experienced some delays in shipping products to our customers. Any significant delay or interruption in our supply chain could impair our ability to meet the demands of our customers in the future and could harm our business.

We may need to identify and qualify new suppliers in response to disruptions and difficulties experienced by some of our current suppliers. The process of identifying and qualifying suppliers is lengthy with no guarantee of ultimately mitigating the current issues experience by the Company. This process can include but is not limited to delays in qualification, quality issues on components, and higher costs to source these components. All of these issues may impair our ability to meet the demands of our customers in the future.

Reverse Stock Split

On March 11, 2022, our Board of Directors approved an amendment to our amended and restated certificate of incorporation to effect a 1-for-20 reverse stock split of our issued and outstanding common stock. The reverse stock split became effective on March 14, 2022. The par value of the common stock and preferred stock was not adjusted as a result of the reverse stock split. All common stock, stock options, and restricted stock units, and per share amounts in the financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stock splits.

Principal Financial and Accounting Officer

As previously disclosed, our prior Chief Financial Officer left the Company on May 12, 2022. On July 21, 2022, our board of directors appointed Nabeel Subainati, who currently serves as our Vice President, Corporate Controller, as our Principal Financial Officer and Principal Accounting Officer.

Financing

During the three and nine months ended September 30, 2022 our net loss and comprehensive net loss was $4.1 million and $13.4 million, respectively; during the years ended December 31, 2021 and 2020, it was $17.4 million and $19.0 million, respectively. We have not been profitable since inception, and as of September 30, 2022, our accumulated deficit was $398.2 million. Since inception, we have financed our operations primarily through private and public placements of our preferred and common securities and, to a lesser extent, debt financing arrangements.

In September 2015, we entered into a Term Loan Agreement, or Loan Agreement, with CRG Partners III L.P. and certain of its affiliated funds, collectively CRG, under which we were able to borrow up to $50.0 million on or before March 29, 2017, subject to certain terms and conditions. We borrowed $30.0 million on September 22, 2015 and an additional $10.0 million on June 15, 2016 under the Loan Agreement. Contemporaneously with the execution of the Loan Agreement, we entered into a Securities Purchase Agreement with CRG, pursuant to which CRG purchased 870 shares of our common stock on September 22, 2015 at a price of $111,928 per share, which represents the 10-day average of closing prices of our common stock ending on September 21, 2015. Pursuant to the Securities Purchase Agreement, we filed a registration statement covering the resale of the shares sold to CRG and must comply with certain affirmative covenants during the time that such registration statement remains in effect.

On February 14, 2018, we entered into a Series A preferred stock Purchase Agreement (the “Series A Purchase Agreement”) with CRG, pursuant to which it agreed to convert $38.0 million of the outstanding principal amount of its senior secured term loan (plus the back-end fee and prepayment premium applicable thereto) under the Loan Agreement into a newly authorized Series A preferred stock. As discussed in the section of this report titled “Dividend Policy,” the holders of Series A preferred stock are entitled to receive annual accruing dividends at a rate of 8%, payable in additional shares of Series A preferred stock or cash, at our option. The shares of Series A preferred stock have no voting rights and rank senior to all other classes and series of the Company’s equity in terms of repayment and certain other rights.

We have entered into several amendments to the Term Loan Agreement (the “Amendments”) with CRG since September 2015, the most recent of which was entered into on August 10, 2022. The Amendments, among other things: (1) extended the interest-only period through December 31, 2023; (2) extended the period during which we may elect to pay a portion of interest in payment-in-kind, or PIK, interest payments through December 31, 2023 so long as no default has occurred and is continuing; (3) permitted us to make our entire interest payments in PIK interest payments through December 31, 2023 so long as no default has occurred and is continuing; (4) extended the maturity date to December 31, 2025; (5) reduced the minimum liquidity requirement to $3.5 million at all times; (6) eliminated the minimum revenue covenant for 2018, 2019 and 2020; (7) reduced the minimum revenue covenant to $8 million for 2022; (8) added minimum revenue covenants of $10 million for 2023, $14.5 million for 2024 and $17 million for 2025; (9) changed the date under the on-going stand-alone representation regarding no “Material Adverse Change” to December 31, 2020; (10) amended the on-going stand-alone representation and stand-alone event of default regarding Material Adverse Change such that any adverse change in or effect upon the revenue of us and our subsidiaries due to the outbreak of COVID-19 will not constitute a Material Adverse Change; and (11) provided CRG with board observer rights.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. There have been no significant and material changes in our critical accounting policies during the nine months ended September 30, 2022, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies and Significant Judgments and Estimates” in our most recent Annual Report on Form 10-K, as filed with the SEC on March 22, 2022.

Components of Our Results of Operations

Revenues

All of our revenues are currently derived from sales of our various PAD catheters in the United States and select international markets, Lightbox consoles, and related services. For the three and nine months ended September 30, 2022, there was one customer that represented 11% and 13% of revenues, respectively. For the three and nine months ended September 30, 2021, there were no customers that represented 10% or more of revenues.

Revenues may fluctuate from quarter to quarter due to a variety of factors including capital equipment purchasing patterns that are typically increased towards the end of the calendar year and decreased in the first quarter and our ability to have product available in light of supply chain challenges. In addition, during the first quarter, our results can be harmed by adverse weather and by resetting of annual patient healthcare insurance plan deductibles, both of which may cause patients to delay elective procedures. In the third quarter, the number of elective procedures nationwide is historically lower than other quarters throughout the year, which we believe is primarily attributable to the summer vacations of physicians and their patients. Additionally, we believe COVID-19 and hospital capacity and staffing issues have had and will continue to have an adverse effect on our ability to generate sales due to the fluctuating and unpredictable levels of capacity medical providers have to perform procedures that require the use of our products.

Cost of Revenues and Gross Margin

Cost of revenues consists primarily of costs related to manufacturing overhead, materials and direct labor. We expense all warranty costs and inventory provisions as cost of revenues. We periodically write down inventory for estimated excess, obsolete and non-sellable inventories based on assumptions about future demand, past usage, changes to manufacturing processes and overall market conditions. A significant portion of our cost of revenues currently consists of manufacturing overhead costs. These overhead costs include the cost of quality assurance, material procurement, inventory control, facilities, equipment and operations supervision and management. We expect overhead costs as a percentage of revenues to become less significant as our production volume increases. Cost of revenues also includes depreciation expense for production equipment, depreciation and related maintenance expense for placed Lightboxes held by customers and certain direct costs such as those incurred for shipping our products.

We calculate gross margin as gross profit divided by revenues. Our gross margin has been and will continue to be affected by a variety of factors, primarily production volumes, manufacturing costs, product yields, headcount, charges for excess and obsolete inventories and cost-reduction strategies. We intend to use our design, engineering and manufacturing capabilities to further advance and improve the efficiency of our manufacturing processes, which we believe will reduce costs and increase our gross margin. In the future, we may seek to manufacture certain of our products outside the United States to further reduce costs. Our gross margin will likely fluctuate from quarter to quarter as we continue to introduce new products and sales channels, and as we adopt new manufacturing processes and technologies.

Research and Development Expenses

Research and development, or R&D, expenses consist primarily of engineering, product development, clinical and regulatory affairs, consulting services, materials, depreciation, and other costs associated with products and technologies in development. These expenses include employee compensation, including stock-based compensation, supplies, materials, quality assurance expenses allocated to R&D programs, consulting, related travel expenses and facilities expenses. Clinical expenses include clinical trial design, clinical site reimbursement, data management, travel expenses and the cost of manufacturing products for clinical trials. We expect R&D expenses to vary over time depending on the level and timing of our new product development efforts, as well as our clinical development, clinical trial, and other related activities.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses consist primarily of compensation for personnel, including stock-based compensation, selling and marketing functions, physician education programs, business development, finance, information technology and human resource functions. Other SG&A expenses include commissions, training, travel expenses, educational and promotional activities, marketing initiatives, market research and analysis, conferences and trade shows, professional services fees, including legal, audit and tax fees, insurance costs and general corporate expenses. We expect SG&A expenses to increase as we expand our commercial efforts and additional costs related to corporate matters.

Interest Expense, Net

Interest expense, net consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the amortization of debt discount and issuance costs associated with our debt agreement.

Other (Expense) Income, Net

Other (expense) income, net primarily consists of gains and losses resulting from the remeasurement of foreign exchange transactions and other miscellaneous income and expenses.

Results of Operations:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(in thousands, except percentages)
Revenues	$	2,252		$	2,366		$	6,272		$	7,727
Cost of revenues		1,462			1,566			4,301			5,015
Gross profit		790			800			1,971			2,712
Gross margin		35	%		34	%		31	%		35	%
Operating expenses:
Research and development		1,086			1,397			3,244			4,502
Selling, general and administrative		3,384			3,892			10,862			11,755
Total operating expenses		4,470			5,289			14,106			16,257
Loss from operations		(3,680	)		(4,489	)		(12,135	)		(13,545	)
Interest expense, net		(407	)		(419	)		(1,286	)		(1,214	)
Other (expense) income, net		—			(4	)		(20	)		2,343
Net loss and comprehensive loss	$	(4,087	)	$	(4,912	)	$	(13,441	)	$	(12,416	)

Comparison of Three Months Ended September 30, 2022 and 2021

Revenues.

For the three months ended September 30, 2022, revenue decreased by approximately $0.1 million or 5% compared to the three months ended September 30, 2021. The decrease in revenues reflects the fluctuating demand primarily due to the adverse impacts of COVID-19 and hospital staffing shortages as capacity limitations in hospitals have limited the ability of practitioners to perform elective surgical procedures using our products in certain jurisdictions. During the quarter ended September 30, 2021, we experienced increases in revenue largely due to easing restrictions from COVID-19 prompting the performance of a backlog of elective procedures that were previously deferred during 2020. We anticipate that COVID-19, hospital staffing and hospital capacity challenges could continue to impact demand for our products, for the foreseeable future.

Cost of Revenues and Gross Margin.

For the three months ended September 30, 2022, cost of revenues decreased by approximately $0.1 million or 7% compared to the three months ended September 30, 2021. This decrease was primarily attributable to the decrease in revenues. Stock-based compensation expense within cost of revenues totaled $4,000 and $24,000 for the three months ended September 30, 2022 and 2021, respectively.

Gross margin for the three months ended September 30, 2022 increased to 35%, compared to 34% during the three months ended September 30, 2021. The increase in gross margin was primarily due to changes in product mix.

Research and Development Expenses (“R&D”).

R&D expenses for the three months ended September 30, 2022 decreased $0.3 million or 22% compared to the three months ended September 30, 2021 primarily due to the completion of our development efforts on the Lightbox 3 last fiscal year. Stock-based compensation expense within R&D totaled approximately $11,000 and $78,000 for the three months ended September 30, 2022 and 2021, respectively.

Selling, General and Administrative Expenses (“SG&A”).

SG&A expenses for the three months ended September 30, 2022 decreased by approximately $0.5 million or 13%, compared to the three months ended September 30, 2021, primarily due to decreased variable compensation which include retention bonuses and decreased selling and marketing ancillary costs. Stock-based compensation expense within SG&A totaled approximately $24,000 and $137,000 for the three months ended September 30, 2022 and 2021, respectively.

Interest Expense, Net.

Interest expense, net for the three months ended September 30, 2022 decreased by less than $0.1 million or 3%, compared to the three months ended September 30, 2021, primarily due to increases in interest income due to the rising money market interest rates, largely offset by higher interest expense resulting from a higher CRG loan balance as PIK interest is being compounded.

Other (Expense) Income, Net.

Comparison of Nine Months Ended September 30, 2022 and 2021

Revenues.

For the nine months ended September 30, 2022, revenue decreased by $1.5 million or 19% compared to the nine months ended September 30, 2021. The decrease in revenues reflect the fluctuating demand primarily due to the adverse impacts of COVID-19 and hospital staffing shortages as capacity limitations in hospitals have limited the ability of practitioners to perform elective surgical procedures using our products in certain jurisdictions. During the nine months ended September 30, 2021, we experienced increases in revenue largely due to easing restrictions from COVID-19 prompting the performance of a backlog of elective procedures that were previously deferred during 2020. We anticipate that COVID-19, hospital staffing shortages and hospital capacity challenges could continue to impact demand for our products, for the foreseeable future.

Cost of Revenues and Gross Margin.

For the nine months ended September 30, 2022, cost of revenues decreased by $0.7 million or 14% compared to the nine months ended September 30, 2021. This decrease was primarily attributable to the decrease in revenues. Stock-based compensation expense within cost of revenues totaled $18,000 and $93,000 for the nine months ended September 30, 2022 and 2021.

Gross margin for the nine months ended September 30, 2022 decreased to 31%, compared to 35% in the nine months ended September 30, 2021. The decrease in gross margin was primarily due to the decrease in revenues and consequently a decrease in economies of scale relating to the decreased levels of production.

Research and Development Expenses (“R&D”).

R&D expenses for the nine months ended September 30, 2022 decreased by $1.3 million or 28%, compared to the nine months ended September 30, 2021 primarily due to the completion of our development efforts on the Lightbox 3 last fiscal year. Stock-based compensation expense within R&D totaled approximately $37,000 and $274,000 for the nine months ended September 30, 2022 and 2021, respectively. We expect R&D expense to fluctuate based on the ongoing product development of our coronary device and future iterations of existing product lines.

Selling, General and Administrative Expenses (“SG&A”).

SG&A expenses for the nine months ended September 30, 2022 decreased by $0.9 million or 8%, compared to the nine months ended September 30, 2021, primarily due to decreased variable compensation which include retention bonuses and decreased selling and marketing ancillary costs, partially offset by increased third-party expenses resulting from corporate and administrative activities. Stock-based compensation expense within SG&A totaled approximately $72,000 and $593,000 for the nine months ended September 30, 2022 and 2021, respectively.

Interest Expense, Net.

Interest expense, net for the nine months ended September 30, 2022 increased by approximately $0.1 million or 6%, compared to the nine months ended September 30, 2021, primarily due to the higher CRG loan balance from PIK interest being compounded, partially offset by increases in interest income due to the recent rising money market interest rates.

Other (Expense) Income, Net.

Other (expense) income, net primarily consists of gains and losses resulting from the remeasurement of foreign exchange transactions, which are typically a small percentage of transaction volume, and other miscellaneous income and expenses. Other income, net for the nine months ended September 30, 2022 decreased approximately $2.4 million or 101% in comparison to the nine months ended September 30, 2021 as the PPP loan was fully forgiven resulting in a gain on extinguishment of that debt, a one-time occurrence during the prior year period. Both periods also included remeasurement gains and losses from foreign exchange transactions resulting in nominal changes between periods.

Liquidity and Capital Resources

As of September 30, 2022, we had cash and cash equivalents of $17.3 million and an accumulated deficit of $398.2 million, compared to cash and cash equivalents of $19.5 million and an accumulated deficit of $384.8 million as of December 31, 2021. We expect to incur losses for the foreseeable future. We believe that our cash and cash equivalents of $17.3 million at September 30, 2022 and expected revenues, debt and financing activities and funds from operations will be sufficient to allow us to fund our current operations through the third quarter of 2023.

To date, we have financed our operations primarily through net proceeds from the issuance of our preferred stock, common stock and debt financings, our At The Market program, our initial public offering, or IPO, our follow-on public offerings and warrant issuances. We do not know when or if our operations will generate sufficient cash to fund our ongoing operations. Additional debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders and require significant debt service payments, which divert resources from other activities. Additional financing may not be available at all, or if available, may not be in amounts or on terms acceptable to us. If we are unable to obtain additional financing, we may be required to delay the development, commercialization and marketing of our products and we may be required to significantly scale back our business and operations.

In addition, the COVID-19 pandemic and responses thereto have resulted in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, restrictions on elective medical procedures, and reduced business and consumer spending, which could increase the cost of capital and/or limit the availability of capital to us. While we have taken certain actions to manage our available cash and other resources to mitigate the effects of COVID-19 and hospital staffing shortages, and related hospital capacity issues, on our business, there can be no assurance that such strategies will be successful in mitigating the negative impacts resulting from the COVID-19 pandemic on our liquidity and capital resources.

Equity Financings

On February 2, 2021, under the shelf registration statement, we completed a bought deal offering of 500,000 shares of common stock at an offering price of $28.80 per share. As a result, we received aggregate net proceeds of approximately $13.0 million after underwriting discounts, commissions, legal and accounting fees, and other ancillary expenses.

January 2022 Offering

On January 14, 2022, we entered into a securities purchase agreement with several institutional investors pursuant to which we agreed to sell and issue, in a registered direct offering (“January 2022 Offering”), an aggregate of 7,600 shares of the our Series D Convertible Preferred Stock, par value of $0.001 per share, at an offering price of $1,000 per share which was convertible into common stock at a conversion price of $8.00 per share. Concurrently, we agreed to issue to these investors warrants to purchase up to an aggregate of 807,500 shares of our common stock (the “Common Warrants”). As a result, we received aggregate net proceeds of approximately $6.7 million after underwriting discounts, commissions, legal and accounting fees, and other ancillary expenses. During the nine months ended September 30, 2022, all 7,600 shares issued of Series D preferred stock were converted into a total of 950,000 shares of common stock. Consequently, there were no shares of Series D preferred stock outstanding as of September 30, 2022.

The 807,500 Common Warrants have an exercise price of $9.60 per share and became exercisable beginning July 14, 2022. The Common Warrants will expire five years following the time they become exercisable, or July 14, 2027. We also issued to the Placement Agent or its designees warrants to purchase up to an aggregate of 66,500 shares of common stock (the “Placement Agent Warrants”). The Placement Agent Warrants are subject to the same terms as the Common Warrants, except that the Placement Agent Warrants have an exercise price of $10.00 per share and a term of five years from the commencement of the sales pursuant to the January 2022 Offering, or January 12, 2027.

At The Market Offering Agreement

On May 20, 2022, we 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 we may offer and sell shares of common stock, par value $0.001 per share (the “Shares”) up to an aggregate offering price of $7,000,000 from time to time, in an at the market public offering. Sales of the Shares are to be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. The Agent will receive a commission from us of 3.0% of the gross proceeds of any Shares sold under the ATM Agreement. The Shares sold under the ATM Agreement are offered and sold pursuant to the Company’s shelf registration statement on Form S-3, which was initially filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2022 and declared effective on April 7, 2022, and a prospectus supplement and the accompanying prospectus relating to the At The Market Offering filed with the SEC on May 20, 2022. During the quarter ended September 30, 2022, we sold 259,137 shares of common stock at an average price of $1.56 per share for aggregate proceeds of $0.4 million, of which approximately $12,000 was paid in the form of commissions to the Agent. During the nine months ended September 30, 2022, we sold 585,603 shares of common stock pursuant to the ATM Agreement at an average price of $1.67 per share for aggregate proceeds of $1.0 million, of which approximately $29,000 was paid in the form of commissions to the Agent. Other than the ATM Agreement, we currently do not have any commitments to obtain additional funds. On August 3, 2022, we suspended sales under the ATM Agreement. While we may resume sales in the future, there can be no assurance that we will be successful in acquiring additional funding through these means.

August 2022 Offering

On August 4, 2022, we entered into a securities purchase agreement with a single institutional investor for the issuance and sale of 1,484,019 shares of its common stock in a registered direct offering (“RD” or “Registered Direct”) at a purchase price of $1.752 per share, or pre-funded warrants in lieu thereof. In a concurrent private placement, we also agreed to issue and sell to the investor 1,369,864 shares of common stock at the same purchase price as in the registered direct offering, or pre-funded warrants in lieu thereof (“Private Placement” and together with the Registered Direct offering the “August 2022 Offering”). As a result, we received aggregate net proceeds of approximately $4.4 million after underwriting discounts, commissions, legal and accounting fees, and other ancillary expenses.

As a result, in the Registered Direct offering, we issued (i) 700,000 shares of common stock, and (ii) pre-funded warrants in lieu of common stock to purchase up to an aggregate of 784,019 shares of common stock (the “RD Pre-Funded Warrants”) and in the Private Placement, pre-funded warrants to purchase up to an aggregate of 1,369,864 shares of common stock (the “Private Pre-Funded Warrants” and together with the RD Pre-Funded Warrants the “August 2022 Pre-Funded Warrants”).

In addition, we issued to the investor in the August 2022 Offering Series A preferred investment options to purchase up to 2,853,883 additional shares of our common stock and Series B preferred investment options to purchase up to 2,853,883 additional shares of our common stock (the “Preferred Investment Options”). The Series A preferred investment options have an exercise price of $1.502 per share, are immediately exercisable, and will expire five and one-half years from the date of issuance, or February 8, 2028, and the Series B preferred investment options have an exercise price of $1.502 per share, are immediately exercisable, and will expire two years from the date of issuance, or August 8, 2024. We also issued to the Placement Agent or its designees preferred investment options to purchase up to an aggregate of 171,233 shares of common stock (the “Placement Agent Preferred Investment Options”). The Placement Agent Preferred Investment Options are subject to the same terms as the Preferred Investment Options, except that the Placement Agent Preferred Investment Options have an exercise price of $2.19 per share and a term of five years from the commencement of the sales pursuant to the August 2022 Offering, or August 3, 2027.

PPP Loan

On April 23, 2020, we received loan proceeds of $2.3 million (the “PPP Loan”) pursuant to the PPP under the CARES Act. The PPP Loan, which was in the form of a promissory note, dated April 20, 2020 (the “Promissory Note”), between us and Silicon Valley Bank (“SVB”) as the lender, was set to mature on April 20, 2022 and bore interest at a fixed rate of 1% per annum.

As previously disclosed, the PPP was administered by the U.S. Small Business Administration (the “SBA”). The SBA was given the authority under the PPP to forgive loans if all employees were kept on the payroll for a required period and the loan proceeds were used for payroll, rent and utilities. We applied for debt forgiveness in December 2020. On April 17, 2021, we were notified by SVB that its PPP Loan had been fully forgiven by the SBA and that there was no remaining balance on the PPP Loan. We recorded the forgiveness as other income in April 2021 in the amount of $2.4 million, of which approximately $23,000 was accrued interest.

Contractual Obligations

Our principal obligations consist of the operating lease for our facility, our Loan Agreement with CRG and non-cancelable purchase commitments. The following table sets out, as of September 30, 2022, our contractual obligations due by period (in thousands):

	Payments Due by Period
	Less Than 1 Year		2 - 3 Years		4-5 Years		More Than 5 Years		Total
Operating lease obligations ⁽¹⁾	$	1,193	$	1,441	$	—	$	—	$	2,634
CRG Loan ⁽²⁾		—		15,200		4,184		—		19,384
Noncancelable purchase commitments ⁽³⁾		1,462		27		23		—		1,512
	$	2,655	$	16,668	$	4,207	$	—	$	23,530

⁽¹⁾

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 above, the lease requires the Company to pay property taxes, insurance, maintenance, and repair costs. The lease will expire on November 30, 2024.

(2)

The total CRG Loan amount, shown as borrowings on the balance sheet as of September 30, 2022, is $13.7 million. The contractual obligation in the table above of $19.4 million under the CRG Loan includes future interest to be accrued but not paid in cash as well as a $2.2 million back-end fee to be paid in December 2025 upon maturity of the CRG Loan which is being accreted. For more information, see Part I, Item 1 “Unaudited Financial Statements, Footnote 5. Borrowings.”

(3)

Noncancelable purchase commitments consist of agreements to purchase goods and services entered into in the ordinary course of business.

Cash Flows

	Nine Months Ended September 30,
	2022			2021
	(in thousands)
Net cash (used in) provided by:
Operating activities	$	(14,043	)	$	(12,166	)
Investing activities		(31	)		(18	)
Financing activities		11,919			13,077
Net change in cash and cash equivalents	$	(2,155	)	$	893

Net Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2022 was $14.0 million, consisting primarily of a net loss of $13.4 million and an increase in net operating assets of $2.5 million, partially offset by non-cash charges of $1.9 million. Non-cash charges largely related to non-cash interest expense of $1.3 million. The increase in net operating assets was primarily due to the increase in inventory of $1.2 million due to purchases of inventory components in anticipation of forecasted demand in light of extended lead times and a decrease in accounts payable due to timing of payments and overall, less expenditures. These increases were partially offset by the increase in other long-term liabilities as certain variable compensation continues to accrue.

Net cash used in operating activities for the nine months ended September 30, 2021 was $12.2 million, consisting primarily of a net loss of $12.4 million and an increase in net operating assets of approximately $0.3 million, and net non-cash gains of $0.6 million. We recognized a non-cash gain on extinguishment of debt due to the forgiveness of the PPP Loan of $2.4 million. This gain was partially offset by non-cash charges related to stock-based compensation of $1.0 million, non-cash interest expense of $1.2 million, and depreciation of $0.5 million. The increase in net operating assets was primarily due to the increase in inventory and prepaid expenses, and a decrease in accrued compensation; partially offset by an increase in accounts payable and other long-term liabilities.

Net Cash Used in Investing Activities

Net cash used in investing activities during both the nine months ended September 30, 2022 and 2021 consisted of purchases of property and equipment.

Net Cash Provided by Financing Activities

Net cash provided by financing activities in the nine months ended September 30, 2022 of $11.9 million primarily relates to proceeds of $6.7 million from the issuance of preferred stock and warrants in the January 2022 Offering, net of commissions and various issuance costs, and proceeds of $4.4 million from the issuance of common stock and preferred investment options in the August 2022 Offering. We also received approximately $0.8 million, net of commissions and various issuance costs, from the sale of common stock pursuant to the ATM Agreement.

Net cash provided by financing activities in the nine months ended September 30, 2021 of $13.1 million relates to proceeds from the issuance of common stock in our February 2021 public offering, net of various issuance costs.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The risk associated with fluctuating interest rates is primarily limited to our cash equivalents, which are carried at quoted market prices. Due to the short-term maturities and low risk profile of our cash equivalents, an immediate 100 basis point change in interest rates would not have a material effect on the fair value of our cash equivalents. We do not currently use or plan to use financial derivatives in our investment portfolio.

Credit Risk

As of September 30, 2022 and December 31, 2021, our cash and cash equivalents were maintained with one financial institution in the United States, and our current deposits are likely in excess of insured limits. We have reviewed the financial statements of this institution and believe it has sufficient assets and liquidity to conduct its operations in the ordinary course of business with little or no credit risk to us.

Our accounts receivable primarily relate to revenues from the sale of our Lumivascular platform products to hospitals and medical centers in the United States. At September 30, 2022, there was one customer that represented 11% of the Company’s accounts receivable. At December 31, 2021, there was one customer that represented 21% of the Company’s accounts receivable.

Foreign Currency Risk

Our business is primarily conducted in U.S. dollars. Any transactions that may be conducted in foreign currencies are not expected to have a material effect on our results of operations, financial position or cash flows.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2022. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2022, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

Our business, financial condition and results of operations can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2021 and Part II, Item 1A of our quarterly reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 2022 under the heading “Risk Factors.” Any one or more of these risk factors could, in whole or in part, directly or indirectly, materially adversely impact our business and stock price and cause our actual financial condition and results of operations to vary materially from its past, or its anticipated future, financial condition and results of operations.

Nasdaq may delist our securities from its exchange, which could harm our business and limit our stockholders’ liquidity.

Our common stock is currently listed on the Nasdaq Capital Market (“Nasdaq”), which has qualitative and quantitative listing criteria. However, we cannot assure you that our common stock will continue to be listed on Nasdaq in the future. In order to continue listing our common stock on Nasdaq, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity, a minimum number of holders of our common stock and a minimum bid price.

In particular, Nasdaq Listing Rule 5550(a) and 5550(b)(1) require us to maintain a minimum stockholders’ equity of $2.5 million. While we are currently in compliance with this rule, we may not be able to maintain compliance in the future. We have, since our inception, incurred net losses and expect we will continue to incur net losses. The decline in our equity is a direct result of our net loss. As we continue to incur losses, our accumulated deficit will continue to increase, which will have a negative impact on our equity balance. Therefore, if we do not continually raise funds through various equity offerings that have an accretive value to our equity, our equity balances will continue to decline. If we are unable to raise capital in a manner that provides accretive value to our equity, our stockholders’ equity may decrease below the minimum required by Nasdaq, which could result in Nasdaq delisting our common stock.

If Nasdaq delists our common stock from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

●	a limited availability of market quotations for our securities;
●	reduced liquidity for our securities;
●	a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
●	a limited amount of news and analyst coverage; and
●	a decreased ability to issue additional securities or obtain additional financing in the future.

Covenants under the Loan Agreement will restrict our business in many ways.

The Loan Agreement contains various covenants that limit, subject to certain exceptions, our ability to, among other things:

●	incur or assume liens;
●	incur additional debt or provide guarantees in respect of obligations of other persons;
●	issue redeemable stock and preferred stock;
●	pay dividends or make distributions on capital stock, repurchase, redeem or make payments on capital stock or repay, repurchase, redeem, retire, defease, acquire or cancel debt prior to the stated maturity thereof;
●	make loans, investments or acquisitions;
●	create or permit restrictions on the ability of our subsidiaries to pay dividends or make other distributions to us or to guarantee our debt, limit our or any of our subsidiaries ability to create liens, or make or pay intercompany loans or advances;
●	enter into certain transactions with affiliates;
●	sell, transfer, license, lease or dispose of our or our subsidiaries’ assets, including the capital stock of our subsidiaries; and
●	dissolve, liquidate, consolidate or merge with or into, or sell substantially all of our assets to another person.

In particular, the Loan Agreement, as most recently amended on August 10, 2022, includes a covenant that we maintain a minimum of $3.5 million of cash and certain cash equivalents, and we will have to achieve minimum revenues of $8.0 million in 2022, $10.0 million in 2023, $14.5 million in 2024 and $17.0 million in 2025. Our revenue for the three and nine months ended September 30, 2022 was approximately $2.3 million and $6.3 million, respectively. Based on our annualized revenue as of September 30, 2022, we are currently on-track to satisfy the minimum revenue covenant for 2022. However, should we fail to meet the applicable minimum revenue target in any calendar year, the Loan Agreement provides a cure right if we prepay a portion of the outstanding principal equal to 2.0 times the revenue shortfall. Such prepayment would use capital resources that are otherwise required for us to operate our business and, therefore, if we are required to pay such amounts our liquidity and operations could be adversely affected. In addition, if we are unable to make such required prepayment and, as a result, default on our obligations under the Loan Agreement, our business will be adversely affected. There can be no assurance as to our future compliance with the covenants under the Loan Agreement, as amended.

The covenants contained in the Loan Agreement could adversely affect our ability to execute our business strategies by restricting our ability to make capital expenditures, engage in strategic acquisitions, refinance our outstanding indebtedness, or obtain additional financing. Such restrictions may make it difficult to plan for or react to changes in market conditions, such as future downturns in our business or the economy in general.

In addition, potential sources of equity financing may decline to invest in our company given the amount of debt and the rights that debt holders have to get paid before equity holders. In order to facilitate equity investments, future equity investors may require that we convert all or a portion of our debt to equity, and our debtholders may not agree to such terms. The amount of debt could therefore affect our ability to finance our company and prevent us from obtaining necessary operating capital as a result.

We depend on our senior management team and the loss of one or more key employees or an inability to attract and retain highly skilled employees could harm our business.

Our success largely depends upon the continued services of our executive management team and key employees and the loss of one or more of our executive officers or key employees could harm us and directly impact our financial results. Our employees may terminate their employment with us at any time. Changes in our executive management team resulting from the hiring or departure of executives could disrupt our business. For example, our Chief Financial Officer resigned from the Company effective May 12, 2022. If we are unable to hire one or more replacement employees or otherwise fill his responsibilities, our ability to effectively manage our business could be adversely affected.

We must attract and retain highly qualified personnel. Competition for skilled personnel is intense, especially for engineers with high levels of experience in designing and developing medical devices and for sales professionals. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources and, potentially, damages. In addition, job candidates and existing employees, particularly in the San Francisco Bay Area, often consider the value of the stock awards they receive in connection with their employment. If the perceived value of our stock awards declines or if we do not make grants of stock-based incentive awards, it may harm our ability to recruit and retain highly skilled employees. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business would be harmed.

We depend on third-party vendors to manufacture some of our components, coating and sub-assemblies, including some single source suppliers, which could make us vulnerable to supply shortages and price fluctuations that could harm our business.

We currently manufacture some of our components and sub-assemblies at our Redwood City facility and rely on third-party vendors for other components and sub-assemblies used in our Lumivascular platform. For several of our components and sub-assemblies we rely on single and limited source suppliers. For example, we rely on single vendors for our optical fiber, coatings and drive cables that are key components of our catheters, and we rely on single vendors for our laser and data acquisition card that are key components of our Lightbox. These components are critical to our products and there are relatively few, and in some cases, no alternative sources of supply. Further, we do not carry a significant inventory of these components. If our suppliers of these materials cease doing business, reduce their production capacity, or otherwise limit the amount of materials we can purchase, we may be unable to acquire necessary materials on favorable terms, or at all. If we are unable to purchase required inputs for our production, our business will be adversely affected.

Our reliance on third-party vendors subjects us to a number of risks that could impact our ability to manufacture our products and harm our business.

We rely on third-party vendors to supply us with raw materials, as well as certain components and sub-assemblies used in the manufacture of our products. Our reliance on such third parties subjects us to a number of risks that could adversely affect our operations, including:

●	interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations;
●	delays in shipments resulting from slowdowns in manufacturing due to the COVID-19 pandemic or other causes, such as government restrictions on the movement of people and goods;
●	delays in product shipments resulting from uncorrected defects, reliability issues or a supplier’s failure to consistently produce quality components;
●	price fluctuations due to a lack of long-term supply arrangements with our suppliers for key components;
●	inability to obtain adequate supply in a timely manner or on commercially reasonable terms;
●	difficulty identifying and qualifying alternative or additional suppliers for components in a timely manner;
●	inability of the manufacturer or supplier to comply with QSR as enforced by the FDA and state regulatory authorities;
●	inability to control the quality of products manufactured by third parties;
●	production delays related to the evaluation and testing of products from alternative suppliers and corresponding regulatory qualifications; and
●	delays in delivery by our suppliers due to changes in demand from us or their other customers.

The ongoing COVID-19 pandemic, including subsequent variants, and measures taken in response by governments and businesses worldwide to contain its spread, including quarantines, facility closures, travel and logistics restrictions, border controls, and shelter in place or stay at home and social distancing orders, have adversely impacted and are expected to continue to adversely impact global supply chain, manufacturing, and logistics operations. Shipping and freight delays have also been increasing in response to port closures, port congestion, shipping container and ship shortages, and global conflicts. To the extent the COVID-19 pandemic and other events result in continuation or worsening of manufacturing and shipping delays and constraints, our suppliers of raw materials and other components may have difficulty obtaining and providing the materials we require to manufacture our products, which could adversely affect our ability to acquire and maintain adequate inventory and meet demand for our products.

Some of our suppliers have begun requiring us to provide longer-term forecasts of our supply requirements. If our assumptions about customer demand are incorrect, the forecasts we provide to our suppliers may result in excess inventory due to reduced demand or insufficient inventory to meet demand, which would adversely affect our business and results of operations. We also compete with other manufacturers who require the same components as us, or inputs used in producing the components that we purchase. Other purchasers may be able to leverage stronger relationships or greater purchasing power than we have to gain advantages over us in the supply chain.

In addition, any significant delay or interruption in the supply of components or sub-assemblies, or our inability to obtain substitute components, sub-assemblies or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and harm our business.

Disruptions of supply chains could have a material adverse effect on our operating and financial results

Disruption of supply chains due to trade restrictions, political instability, severe weather, natural disasters, public health crises such as the ongoing COVID-19 pandemic, terrorism, product recalls, port closures, labor supply or stoppages, the financial or operational instability of key suppliers and carriers, government restrictions or measures, or other reasons could impair our ability to distribute our products, or cause the demand for our products to decrease. Many industries, including our own, face supply chain challenges as a result of COVID-19 and other macroeconomic issues, including reduced freight availability and increased costs, port disruption, manufacturing facility closures, labor shortages and other supply chain disruptions. For example, hospitals reported a shortage of an iodinated contract medium used in X-rays, radiography and CT scans due to Shanghai’s lockdowns. A shortage of such product could lead to a reduced number of surgeries and decrease the demand for our products.

In addition, we have and continue to experience supply chain challenges related to extended lead times from certain key suppliers. Should these challenges persist or worsen, we may be unable to manufacture enough inventory to meet the current demand for our Lumivascular products and consequently incur significant adverse effects on our operating and financial results. To the extent we are unable to mitigate the likelihood or potential impact of such events, there could be a material adverse effect on our operating and financial results.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

On November 7, 2022, the Board adopted a new form of grant agreement for restricted stock awards (the “RSA Form Grant Agreement”) granted to employees, including the Company’s executive officers, under the Company’s Amended and Restated 2015 Equity Incentive Plan. The Board also adopted a revised version of the Company’s existing form of grant agreement for restricted stock units (the “RSU Form Grant Agreement”), which clarifies tax withholding mechanics and makes other minor updating changes. Both the RSA Form Grant Agreement and RSU Form Grant Agreement are subject to the terms of the Company’s Amended and Restated 2015 Equity Incentive Plan. The foregoing descriptions of the RSA Form Grant Agreement and RSU Form Grant Agreement do not purport to be complete and are qualified in their entirety by the full text of the RSA Form Grant Agreement and RSU Form Grant Agreement, which are filed as Exhibits 10.6 and 10.7, respectively.

ITEM 6. EXHIBITS

The following exhibits are being filed herewith:

Exhibit Number		Exhibit Title

4.1(1)		Form of Pre-Funded Common Stock Purchase Warrant - Registered Direct Offering (August 2022)

4.2(1)		Form of Pre-Funded Common Stock Purchase Warrant - Private Placement Offering (August 2022)

4.3(1)		Form of Series A Preferred Investment Option

4.4(1)		Form of Series B Preferred Investment Option

4.5(1)		Form of Placement Agent Preferred Investment Option

10.1(2)		Amendment No. 6 to Term Loan Agreement, dated August 10, 2022, made by and among Avinger, Inc. and GRG Partners III L.P. and certain of its affiliated funds, as lenders.

10.2(1)		Form of Registered Direct Securities Purchase Agreement

10.3(1)		Form of Private Placement Securities Purchase Agreement

10.4(1)		Form of Registration Rights Agreement

10.5(3)+		Amended and Restated 2015 Equity Incentive Plan

10.6+		Form of Restricted Stock Award Grant Agreement

10.7+		Form of Restricted Stock Unit Award Grant Agreement

31.1		Certification of the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document and contained in Exhibit 101.

The certifications filed as Exhibits 32.1 are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Company under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.

+	Indicates management contract or compensatory plan.

(1)	Previously filed as an Exhibit to the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2022, and incorporated by reference herein.
(2)	Previously filed as an Exhibit to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 11, 2022.
(3)	Previously filed as an Exhibit to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 14, 2022, and incorporated by reference herein.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Avinger, Inc.
	(Registrant)


Date: November 9, 2022	/s/ JEFFERY M. SOINSKI
	Jeffrey M. Soinski
	Chief Executive Officer
	(Principal Executive Officer)

Date: November 9, 2022	/s/ NABEEL SUBAINATI
	Nabeel Subainati
	Vice President, Corporate Controller
	(Principal Financial and Accounting Officer)

Exhibit 10.6

AVINGER, INC.
2015 EQUITY INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT

NOTICE OF GRANT OF RESTRICTED STOCK

Unless otherwise defined herein, the terms defined in the 2015 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Restricted Stock Award Agreement, including the Notice of Grant of Restricted Stock (the “Notice of Grant”), the Terms and Conditions of Restricted Stock Grant, and any appendices and exhibits attached thereto (all together, the “Award Agreement”).

Name (“Participant”):	«Name»
Address:	«Address»

The undersigned Participant has been granted the right to receive an Award of Restricted Stock, subject to the terms and conditions of the Plan and this Award Agreement, as follows:

Date of Grant:	«GrantDate»
Vesting Commencement Date:	«VCD»
Number of Shares of Restricted Stock:	«Shares»

Vesting Schedule:

Subject to any acceleration provisions contained in the Plan or set forth below, the Shares of Restricted Stock will vest in accordance with the following schedule:

[INSERT VESTING SCHEDULE]

In the event Participant ceases to be a Service Provider for any or no reason before the Restricted Stock is fully vested, all unvested Shares of Restricted Stock will be immediately forfeited.

Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Award Agreement subject to all of the terms and provisions thereof. Participant has reviewed the Plan and this Award Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and fully understands all provisions of this Award Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Award Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below.

PARTICIPANT			AVINGER, INC.



Signature			By


«Name»
Print Name			Print Name

Address:
«Address»			Title

AVINGER, INC.
2015 EQUITY INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT

TERMS AND CONDITIONS OF RESTRICTED STOCK GRANT

1. Grant of Restricted Stock. The Company hereby grants to the individual (“Participant”) named in the Notice of Grant of Restricted Stock of this Award Agreement (the “Notice of Grant”) under the Plan the number of Shares of Restricted Stock specified in the Notice of Grant, subject to all of the terms and conditions in this Award Agreement and the Plan, which is incorporated herein by reference. Subject to Section 19(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Award Agreement, the terms and conditions of the Plan shall prevail.

2. Rights As a Stockholder. A Share of Restricted Stock may not be sold, assigned, hypothecated or transferred, whether by operation of law or otherwise (including without limitation, transfer by gift, donation, execution, attachment or similar process) prior to vesting as set forth in the Notice of Grant and in Section 3 below (other than a transfer by beneficiary designation upon death as contemplated under Section 3(c)). Such period of vesting shall be referred to herein as the “Restriction Period”). During the Restriction Period, Participant shall have the right to vote the Shares of Restricted Stock. During the Restriction Period, Participant shall not have the right to receive payment or accrual of dividends during the Restriction Period except for such adjustments as provided under Section 14(c) of the Plan. After lapse of the Restriction Period, Participant will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares. Shares shall be issued and recorded by the Company or its transfer agents or registrars (in either certificate or book entry form, at the Company’s discretion) and delivered to Participant through electronic delivery to a brokerage account.

3. Vesting Schedule. Except as provided below, the Restricted Stock awarded by this Award Agreement will vest in accordance with the vesting schedule set forth in the Notice of Grant, subject to Participant continuing to be a Service Provider through each applicable vesting date.

(a) Discretionary Acceleration. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Restricted Stock at any time, subject to the terms of the Plan. If so accelerated, such Shares of Restricted Stock will be considered as having vested as of the date specified by the Administrator, and the Restriction Period will lapse as to such Shares.

(b) Forfeiture Upon Termination as a Service Provider. Notwithstanding any contrary provision of this Award Agreement, if Participant ceases to be a Service Provider for any or no reason, the then‑unvested Shares of Restricted Stock awarded by this Award Agreement will thereupon be forfeited at no cost to the Company and Participant will have no further rights thereunder.

(c) Death of Participant. Any delivery or release of Shares to be made to Participant under this Award Agreement upon expiration of the Restriction Period will, if Participant is then deceased, be made to Participant’s designated beneficiary, or if no beneficiary survives Participant, the administrator or executor of Participant’s estate. Any such transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.

4. Tax Consequences. Participant has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Award Agreement. With respect to such matters, Participant relies solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Award Agreement.

5. Tax Obligations.

(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different, Participant’s employer (the “Employer”), the ultimate liability for any tax and/or social insurance liability obligations and requirements in connection with the Restricted Stock, including, without limitation, (a) all federal, state, and local taxes (including Participant’s Federal Insurance Contributions Act (FICA) obligation) that are required to be withheld by the Company or the Employer or other payment of tax‑related items related to Participant’s participation in the Plan and legally applicable to Participant, (b) Participant’s and, to the extent required by the Company (or Employer), the Company’s (or Employer’s) fringe benefit tax liability, if any, associated with the grant, vesting or delivery of the Restricted Stock or sale of Shares, and (c) any other Company (or Employer) taxes the responsibility for which Participant has, or has agreed to bear, with respect to the Restricted Stock (or the grant, vesting or delivery of Shares thereunder) (collectively, the “Tax Obligations”), is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax Obligations in connection with any aspect of the Restricted Stock, including, but not limited to, the grant, vesting or delivery of the Restricted Stock, the subsequent sale of Shares acquired pursuant to such grant and the receipt of any dividends or other distributions, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Restricted Stock to reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if Participant is subject to Tax Obligations in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax Obligations in more than one jurisdiction. If Participant fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the applicable taxable event, Participant acknowledges and agrees that the Company may refuse to issue or deliver the Shares.

(b) Tax Withholding. Pursuant to such procedures as the Administrator may specify from time to time, the Company and/or Employer shall withhold the minimum amount required to be withheld for the payment of Tax Obligations. The Participant may satisfy such Tax Obligations, in whole or in part (without limitation), if permissible by applicable local law, by (a) paying cash, (b) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the amount of such Tax Obligations, (c) electing to have the Company withhold the amount of such Tax Obligations from Participant’s wages or other cash compensation payable to Participant by the Company and/or the Employer, (d) delivering to the Company already vested and owned Shares having a Fair Market Value equal to such Tax Obligations, or (e) selling a sufficient number of such Shares otherwise deliverable to Participant through such means as the Company may determine in its sole discretion (whether through a broker or otherwise) equal to the amount of the Tax Obligations. To the extent determined appropriate by the Company in its discretion, it will have the right (but not the obligation) to satisfy any Tax Obligations by reducing the number of Shares otherwise deliverable to Participant and, until determined otherwise by the Company, this will be the method by which such Tax Obligations are satisfied. Further, if Participant is subject to tax in more than one jurisdiction between the Date of Grant and a date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges and agrees that the Company and/or the Employer (and/or former employer, as applicable) may be required to withhold or account for tax in more than one jurisdiction. If Participant fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the applicable taxable event, Participant acknowledges and agrees that the Company may refuse to issue or deliver the Shares.

6. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE RESTRICTED STOCK PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS RESTRICTED STOCK AWARD OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE EMPLOYER) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

7. Nature of Grant. In accepting the grant, Participant acknowledges, understands and agrees that:

(a) the grant of the Restricted Stock is voluntary and occasional and does not create any contractual or other right to receive future grants of Restricted Stock, or benefits in lieu of Restricted Stock, even if Shares of Restricted Stock have been granted in the past;

(b) all decisions with respect to future Restricted Stock or other grants, if any, will be at the sole discretion of the Company;

(d) the Shares subject to the Restricted Stock are not intended to replace any pension rights or compensation;

(e) the Shares of Restricted Stock, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end‑of‑service payments, bonuses, long‑service awards, pension or retirement or welfare benefits or similar payments;

(f) the future value of the Shares of Restricted Stock is unknown, indeterminable and cannot be predicted;

(g) for purposes of the Restricted Stock, Participant’s status as a Service Provider will be considered terminated as of the date Participant is no longer actively providing services to the Company or any Parent or Subsidiary (regardless of the reason for such termination and whether or not later to be found invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and unless otherwise expressly provided in this Award Agreement (including by reference in the Notice of Grant to other arrangements or contracts) or determined by the Administrator, Participant’s right to vest in the Restricted Stock under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any, unless Participant is providing bona fide services during such time); the Administrator shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of the Restricted Stock grant (including whether Participant may still be considered to be providing services while on a leave of absence);

(h) unless otherwise provided in the Plan or by the Company in its discretion, the Restricted Stock and the benefits evidenced by this Award Agreement do not create any entitlement to have the Restricted Stock or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and

(i) the following provisions apply only if Participant is providing services outside the United States:

(i) the Shares of Restricted Stock are not part of normal or expected compensation or salary for any purpose;

(ii) Participant acknowledges and agrees that none of the Company, the Employer or any Parent or Subsidiary shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Restricted Stock or of any amounts due to Participant pursuant to the grant, vesting or delivery of the Restricted Stock or the subsequent sale of any Shares; and

(iii) no claim or entitlement to compensation or damages shall arise from forfeiture of the Restricted Stock resulting from the termination of Participant’s status as a Service Provider (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and in consideration of the grant of the Restricted Stock to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Company, any Parent or Subsidiary or the Employer, waives his or her ability, if any, to bring any such claim, and releases the Company, any Parent or Subsidiary and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim.

8. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.

9. Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Award Agreement and any other Restricted Stock grant materials by and among, as applicable, the Employer, the Company and any Parent or Subsidiary for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.

Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Shares of Restricted Stock or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.

Participant understands that Data will be transferred to a stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country of operation (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, any stock plan service provider selected by the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her status as a Service Provider and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant Restricted Stock or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.

10. Address for Notices. Any notice to be given to the Company under the terms of this Award Agreement will be addressed to the Company at Avinger, Inc., 400 Chesapeake Drive, Redwood City, CA 94063, or at such other address as the Company may hereafter designate in writing.

11. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to the Restricted Stock awarded under the Plan or future Shares of Restricted Stock that may be awarded under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on‑line or electronic system established and maintained by the Company or another third party designated by the Company.

12. No Waiver. Either party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party from thereafter enforcing each and every other provision of this Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances.

13. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. The rights and obligations of Participant under this Agreement may only be assigned with the prior written consent of the Company.

14. Additional Conditions to Issuance of Stock. If at any time the Company will determine, in its discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any state, federal or foreign law, the tax code and related regulations or under the rulings or regulations of the United States Securities and Exchange Commission or any other governmental regulatory body or the clearance, consent or approval of the United States Securities and Exchange Commission or any other governmental regulatory authority is necessary or desirable as a condition to the issuance of Shares to Participant (or his or her estate) hereunder, such issuance will not occur unless and until such listing, registration, qualification, rule compliance, clearance, consent or approval will have been completed, effected or obtained free of any conditions not acceptable to the Company.

15. Language. If Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

16. Interpretation. The Administrator will have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares of Restricted Stock have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. Neither the Administrator nor any person acting on behalf of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award Agreement.

17. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Award Agreement.

18. Modifications to the Agreement. This Award Agreement constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Award Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Award Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company.

19. Governing Law and Venue. This Award Agreement will be governed by the laws of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this Award Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation will be conducted in the courts of San Mateo County, California, or the federal courts for the United States for the Northern District of California, and no other courts.

20. Agreement Severable. In the event that any provision in this Award Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Award Agreement.

21. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly warrants that he or she has received Shares of Restricted Stock under the Plan, and has received, read and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time.

22. Entire Agreement. The Plan is incorporated herein by reference. The Plan and this Award Agreement (including the exhibits referenced herein) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant.

23. [Country Addendum. Notwithstanding any provisions in this Award Agreement, the Restricted Stock grant shall be subject to any special terms and conditions set forth in any appendix to this Award Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Award Agreement.]

AVINGER, INC.
2015 EQUITY INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT
COUNTRY ADDENDUM

TERMS AND CONDITIONS

This Country Addendum includes additional terms and conditions that govern the award of Restricted Stock under the Plan if Participant works in one of the countries listed below. If Participant is a citizen or resident of a country (or is considered as such for local law purposes) other than the one in which he or she is currently working or if Participant relocates to another country after receiving the Award of Restricted Stock, the Company will, in its discretion, determine the extent to which the terms and conditions contained herein will be applicable to Participant.

Certain capitalized terms used but not defined in this Country Addendum shall have the meanings set forth in the Plan and/or the Award Agreement to which this Country Addendum is attached.

NOTIFICATIONS

This Country Addendum also includes notifications relating to exchange control and other issues of which Participant should be aware with respect to his or her participation in the Plan. The information is based on the exchange control, securities and other laws in effect in the countries listed in this Country Addendum, as of [DATE]. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the notifications herein as the only source of information relating to the consequences of his or her participation in the Plan because the information may be outdated when Participant vests in the Restricted Stock, or when Participant subsequently sell Shares acquired under the Plan.

In addition, the notifications are general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.

Finally, if Participant is a citizen or resident of a country other than the one in which Participant is currently working (or is considered as such for local law purposes) or if Participant moves to another country after receiving an Award of Restricted Stock, the information contained herein may not be applicable to Participant.

ELECTION TO INCLUDE VALUE OF RESTRICTED PROPERTY IN GROSS INCOME IN YEAR OF TRANSFER UNDER CODE §83(B)

The undersigned hereby elects, pursuant to §83(b) of the Internal Revenue Code of 1986, as amended, to include in gross income as compensation for services the excess (if any) of the fair market value of the property described below over the purchase price thereof, and supplies the following information in accordance with the regulations promulgated under §83(b) and Rev. Proc. 2012-29, 2012-28 IRB 49:

Name:		(“Recipient”)
Address:

Property Description: Restricted Shares (the “Shares”) of Avinger, Inc. (the “Company”).

1.	The date on which the Shares were acquired was [______] (“Grant Date”).

2.	The taxable year for which the election is made is the calendar year [____].

3.	Restrictions:

(a) The Shares are subject to forfeiture in the event Recipient does not fulfill the service obligations under a vesting schedule (the “Restriction Period”) forth in the Restricted Stock Award Agreement.

(b) The Shares may not be directly or indirectly transferred, sold, assigned, pledged, hypothecated, or otherwise disposed of during the Restriction Period.

4. The fair market value as of the Grant Date of the Shares, determined without regard to any restriction other than a restriction which by its terms will never lapse, is: $[___] per Share x [___] Shares = $[____].

5.	The amount paid by the Recipient for the Shares is: $0.00.

6.	The amount to include in gross income is $[____].

Recipient will file this election with the Internal Revenue Service office with which Recipient files his or her annual income tax return not later than thirty (30) days after the Grant Date. A copy of this election will also be furnished to the Company. The Recipient is the person performing services in connection with which the Recipient’s Shares were transferred.

Dated: ____________, 202_

Recipient/Taxpayer Signature: ___________________________

Print Taxpayer Name: __________________

Exhibit 10.7

AVINGER, INC.
2015 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT

NOTICE OF GRANT OF RESTRICTED STOCK UNITS

Unless otherwise defined herein, the terms defined in the 2015 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Restricted Stock Unit Award Agreement, including the Notice of Grant of Restricted Stock Units (the “Notice of Grant”), the Terms and Conditions of Restricted Stock Unit Grant, and any appendices and exhibits attached thereto (all together, the “Award Agreement”).

Name (“Participant”):	«Name»
Address:	«Address»

The undersigned Participant has been granted the right to receive an Award of Restricted Stock Units, subject to the terms and conditions of the Plan and this Award Agreement, as follows:

Date of Grant:	«GrantDate»
Vesting Commencement Date:	«VCD»
Number of Restricted Stock Units:	«Shares»

Vesting Schedule:

Subject to any acceleration provisions contained in the Plan or set forth below, the Restricted Stock Units will vest in accordance with the following schedule:

[INSERT VESTING SCHEDULE]

In the event Participant ceases to be a Service Provider for any or no reason before Participant vests in the Restricted Stock Units, the Restricted Stock Units and Participant’s right to acquire any Shares hereunder will immediately terminate and be forfeited.

PARTICIPANT			AVINGER, INC.



Signature			By


«Name»
Print Name			Print Name

Address:
«Address»			Title

AVINGER, INC.
2015 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT

TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT GRANT

1. Grant of Restricted Stock Units. The Company hereby grants to the individual (the “Participant”) named in the Notice of Grant of Restricted Stock Units of this Award Agreement (the “Notice of Grant”) under the Plan an Award of Restricted Stock Units specified in the Notice of Grant, subject to all of the terms and conditions in this Award Agreement and the Plan, which is incorporated herein by reference. Subject to Section 19(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Award Agreement, the terms and conditions of the Plan shall prevail.

2. Company’s Obligation to Pay. Each Restricted Stock Unit represents the right to receive a Share on the date it vests. Unless and until the Restricted Stock Units will have vested in the manner set forth in Section 4 or 5, Participant will have no right to payment of any such Restricted Stock Units. Prior to actual payment of any vested Restricted Stock Units, such Restricted Stock Unit will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

3. Rights of RSU Holder. Except to the limited extent provided in Section 7, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise), including without limitation, transfer by gift, donation, execution, attachment or similar process, and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately will become null and void. Except for such adjustments as provided under Section 14(c) of the Plan, neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

4. Vesting Schedule. Except as provided below, the Restricted Stock Units awarded by this Award Agreement will vest in accordance with the vesting schedule set forth in the Notice of Grant, subject to Participant continuing to be a Service Provider through each applicable vesting date.

5. Payment After Vesting.

(a) General Rule. Subject to Section 7, any Restricted Stock Units that vest will be paid to Participant (or in the event of Participant’s death, to his or her properly designated beneficiary or estate) in whole Shares. Subject to the provisions of Section 5(b), such vested Restricted Stock Units shall be paid in whole Shares as soon as practicable after vesting, but in each such case within sixty (60) days following the vesting date. In no event will Participant be permitted, directly or indirectly, to specify the taxable year of payment of any Restricted Stock Units payable under this Award Agreement.

(b) Acceleration.

(i) Discretionary Acceleration. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Restricted Stock Units at any time, subject to the terms of the Plan. If so accelerated, such Restricted Stock Units will be considered as having vested as of the date specified by the Administrator. If Participant is a U.S. taxpayer, the payment of Shares vesting pursuant to this Section 5(b) shall in all cases be paid at a time or in a manner that is exempt from, or complies with, Section 409A. The prior sentence may be superseded in a future agreement or amendment to this Award Agreement only by direct and specific reference to such sentence.

(ii) Notwithstanding anything in the Plan or this Award Agreement or any other agreement (whether entered into before, on or after the Date of Grant), if the vesting of the balance, or some lesser portion of the balance, of the Restricted Stock Units is accelerated in connection with Participant’s termination as a Service Provider (provided that such termination is a “separation from service” within the meaning of Section 409A, as determined by the Company), other than due to Participant’s death, and if (x) Participant is a U.S. taxpayer and a “specified employee” within the meaning of Section 409A at the time of such termination as a Service Provider and (y) the payment of such accelerated Restricted Stock Units will result in the imposition of additional tax under Section 409A if paid to Participant on or within the six (6) month period following Participant’s termination as a Service Provider, then the payment of such accelerated Restricted Stock Units will not be made until the date six (6) months and one (1) day following the date of Participant’s termination as a Service Provider, unless Participant dies following his or her termination as a Service Provider, in which case, the Restricted Stock Units will be paid in Shares to Participant’s estate as soon as practicable following his or her death.

(c) Section 409A. It is the intent of this Award Agreement that it and all payments and benefits to U.S. taxpayers hereunder be exempt from, or comply with, the requirements of Section 409A so that none of the Restricted Stock Units provided under this Award Agreement or Shares issuable thereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to be so exempt or so comply. Each payment payable under this Award Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A‑2(b)(2). For purposes of this Award Agreement, “Section 409A” means Section 409A of the Code, and any final Treasury Regulations and Internal Revenue Service guidance thereunder, as each may be amended from time to time.

6. Forfeiture Upon Termination as a Service Provider. Notwithstanding any contrary provision of this Award Agreement, if Participant ceases to be a Service Provider for any or no reason, the then‑unvested Restricted Stock Units awarded by this Award Agreement will thereupon be forfeited at no cost to the Company and Participant will have no further rights thereunder.

7. Death of Participant. Any distribution or delivery to be made to Participant under this Award Agreement upon vesting will, if Participant is then deceased, be made to Participant’s designated beneficiary, or if no beneficiary survives Participant, the administrator or executor of Participant’s estate. Any such transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.

8. Tax Consequences. Participant has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Award Agreement. With respect to such matters, Participant relies solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Award Agreement.

9. Tax Obligations.

(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different, Participant’s employer (the “Employer”), the ultimate liability for any tax and/or social insurance liability obligations and requirements in connection with the Restricted Stock Units, including, without limitation, (a) all federal, state, and local taxes (including Participant’s Federal Insurance Contributions Act (FICA) obligation) that are required to be withheld by the Company or the Employer or other payment of tax‑related items related to Participant’s participation in the Plan and legally applicable to Participant, (b) Participant’s and, to the extent required by the Company (or Employer), the Company’s (or Employer’s) fringe benefit tax liability, if any, associated with the grant, vesting, or delivery of the Restricted Stock Units or sale of Shares, and (c) any other Company (or Employer) taxes the responsibility for which Participant has, or has agreed to bear, with respect to the Restricted Stock Units (or the grant, vesting or delivery of Shares thereunder) (collectively, the “Tax Obligations”), is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax Obligations in connection with any aspect of the Restricted Stock Units, including, but not limited to, the grant, vesting or settlement of the Restricted Stock Units, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends or other distributions, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Restricted Stock Units to reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if Participant is subject to Tax Obligations in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax Obligations in more than one jurisdiction. If Participant fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the applicable taxable event, Participant acknowledges and agrees that the Company may refuse to issue or deliver the Shares.

10. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF THE RESTRICTED STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE EMPLOYER) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS RESTRICTED STOCK UNIT AWARD OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE EMPLOYER) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

11. Nature of Grant. In accepting the grant, Participant acknowledges, understands and agrees that:

(a) the grant of the Restricted Stock Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been granted in the past;

(b) all decisions with respect to future Restricted Stock Units or other grants, if any, will be at the sole discretion of the Company;

(d) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not intended to replace any pension rights or compensation;

(e) the Restricted Stock Units and the Shares subject to the Restricted Stock Units, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end‑of‑service payments, bonuses, long‑service awards, pension or retirement or welfare benefits or similar payments;

(f) the future value of the underlying Shares is unknown, indeterminable and cannot be predicted;

(g) for purposes of the Restricted Stock Units, Participant’s status as a Service Provider will be considered terminated as of the date Participant is no longer actively providing services to the Company or any Parent or Subsidiary (regardless of the reason for such termination and whether or not later to be found invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and unless otherwise expressly provided in this Award Agreement (including by reference in the Notice of Grant to other arrangements or contracts) or determined by the Administrator, Participant’s right to vest in the Restricted Stock Units under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any, unless Participant is providing bona fide services during such time); the Administrator shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of the Restricted Stock Units grant (including whether Participant may still be considered to be providing services while on a leave of absence);

(h) unless otherwise provided in the Plan or by the Company in its discretion, the Restricted Stock Units and the benefits evidenced by this Award Agreement do not create any entitlement to have the Restricted Stock Units or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and

(i) the following provisions apply only if Participant is providing services outside the United States:

(i) the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not part of normal or expected compensation or salary for any purpose;

(ii) Participant acknowledges and agrees that none of the Company, the Employer or any Parent or Subsidiary shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Restricted Stock Units or of any amounts due to Participant pursuant to the settlement of the Restricted Stock Units or the subsequent sale of any Shares acquired upon settlement; and

(iii) no claim or entitlement to compensation or damages shall arise from forfeiture of the Restricted Stock Units resulting from the termination of Participant’s status as a Service Provider (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and in consideration of the grant of the Restricted Stock Units to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Company, any Parent or Subsidiary or the Employer, waives his or her ability, if any, to bring any such claim, and releases the Company, any Parent or Subsidiary and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim.

12. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.

13. Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Award Agreement and any other Restricted Stock Unit grant materials by and among, as applicable, the Employer, the Company and any Parent or Subsidiary for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.

Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Restricted Stock Units or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.

Participant understands that Data will be transferred to a stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country of operation (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, any stock plan service provider selected by the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her status as a Service Provider and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant Restricted Stock Units or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.

14. Address for Notices. Any notice to be given to the Company under the terms of this Award Agreement will be addressed to the Company at Avinger, Inc., 400 Chesapeake Drive, Redwood City, CA 94063, or at such other address as the Company may hereafter designate in writing.

15. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to the Restricted Stock Units awarded under the Plan or future Restricted Stock Units that may be awarded under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on‑line or electronic system established and maintained by the Company or another third party designated by the Company.

16. No Waiver. Either party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party from thereafter enforcing each and every other provision of this Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances.

17. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. The rights and obligations of Participant under this Agreement may only be assigned with the prior written consent of the Company.

18. Additional Conditions to Issuance of Stock. If at any time the Company will determine, in its discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any state, federal or foreign law, the tax code and related regulations or under the rulings or regulations of the United States Securities and Exchange Commission or any other governmental regulatory body or the clearance, consent or approval of the United States Securities and Exchange Commission or any other governmental regulatory authority is necessary or desirable as a condition to the issuance of Shares to Participant (or his or her estate) hereunder, such issuance will not occur unless and until such listing, registration, qualification, rule compliance, clearance, consent or approval will have been completed, effected or obtained free of any conditions not acceptable to the Company. Subject to the terms of the Agreement and the Plan, the Company shall not be required to issue any certificate or certificates for Shares hereunder prior to the lapse of such reasonable period of time following the date of vesting of the Restricted Stock Units as the Administrator may establish from time to time for reasons of administrative convenience.

19. Language. If Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

20. Interpretation. The Administrator will have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. Neither the Administrator nor any person acting on behalf of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award Agreement.

21. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Award Agreement.

22. Modifications to the Agreement. This Award Agreement constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Award Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Award Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Award Agreement, the Company reserves the right to revise this Award Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A or to otherwise avoid imposition of any additional tax or income recognition under Section 409A in connection to this Award of Restricted Stock Units.

23. Governing Law and Venue. This Award Agreement will be governed by the laws of Delaware, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under the Restricted Stock Units or this Award Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California, and agree that such litigation will be conducted in the courts of San Mateo County, California, or the federal courts for the United States for the Northern District of California, and no other courts.

24. Agreement Severable. In the event that any provision in this Award Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Award Agreement.

25. Amendment, Suspension or Termination of the Plan. By accepting this Award, Participant expressly warrants that he or she has received Restricted Stock Units under the Plan, and has received, read and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time.

26. Entire Agreement. The Plan is incorporated herein by reference. The Plan and this Award Agreement (including the exhibits referenced herein) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant.

27. [Country Addendum. Notwithstanding any provisions in this Award Agreement, the Restricted Stock Unit grant shall be subject to any special terms and conditions set forth in any appendix to this Award Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Country Addendum, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Country Addendum constitutes part of this Award Agreement.]

AVINGER, INC.
2015 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
COUNTRY ADDENDUM

TERMS AND CONDITIONS

This Country Addendum includes additional terms and conditions that govern the award of Restricted Stock Units under the Plan if Participant works in one of the countries listed below. If Participant is a citizen or resident of a country (or is considered as such for local law purposes) other than the one in which he or she is currently working or if Participant relocates to another country after receiving the Award of Restricted Stock Units, the Company will, in its discretion, determine the extent to which the terms and conditions contained herein will be applicable to Participant.

Certain capitalized terms used but not defined in this Country Addendum shall have the meanings set forth in the Plan and/or the Award Agreement to which this Country Addendum is attached.

NOTIFICATIONS

This Country Addendum also includes notifications relating to exchange control and other issues of which Participant should be aware with respect to his or her participation in the Plan. The information is based on the exchange control, securities and other laws in effect in the countries listed in this Country Addendum, as of [DATE]. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the notifications herein as the only source of information relating to the consequences of his or her participation in the Plan because the information may be outdated when Participant vests in the Restricted Stock Units and acquires Shares, or when Participant subsequently sell Shares acquired under the Plan.

Finally, if Participant is a citizen or resident of a country other than the one in which Participant is currently working (or is considered as such for local law purposes) or if Participant moves to another country after receiving an Award of Restricted Stock Units, the information contained herein may not be applicable to Participant.

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
Pursuant to

Securities Exchange Act Rules 13a-14(a) and 15d-14(a),

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey Soinski, hereby certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Avinger, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 9, 2022

	/s/ Jeffrey M. Soinski
	Jeffrey M. Soinski
	Chief Executive Officer
	(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
Pursuant to

Securities Exchange Act Rules 13a-14(a) and 15d-14(a),

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Nabeel Subainati, hereby certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Avinger, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 9, 2022

	/s/ Nabeel Subainati
	Nabeel Subainati
	Vice President, Corporate Controller
	(Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Avinger, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), Jeffrey Soinski, as Chief Executive Officer of the Company, and Nabeel Subainati, Vice President, Corporate Controller of the Company, each hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), to his knowledge:

The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 9^th day of November, 2022.

/s/ Jeffrey M. Soinski		/s/ Nabeel Subainati
Jeffrey M. Soinski		Nabeel Subainati
Chief Executive Officer		Vice President, Corporate Controller
(Principal Executive Officer)		(Principal Financial and Accounting Officer)

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.