After declaring doubt in March about its ability to continue as a going concern, semiconductor maker TranSwitch Corp. raised $3.7 million in a secondary public offering on April 3. The move “should mitigate that doubt,” chief financial officer Robert Bosi tells Mergers & Acquisitions in an interview.
TranSwitch said there was substantial doubt about its ability to continue as a going concern, in a March 25 10-K filing with the U.S. Securities and Exchange Commission. In the filing, TranSwitch also said that it would be unable to meet obligations through Dec. 31, 2013, if it didn’t get an infusion of capital.
Since then, the chip maker has taken steps to restructure.
TranSwitch raised $3.7 million in a secondary public offering that closed on April 3, reports Bosi. Maxim Group LLC was the manager for the offering.
Additionally, TranSwitch managed to modify its loan agreement, after failing to maintain the agreed asset-coverage ratio on a loan that was set to mature April 4.
The company, which provides semiconductors for consumer electronics and telecommunications, holds a $5 million asset-based revolving loan agreement with Bridge Bank NA, according to SEC filings. The loan covenant required TranSwitch to maintain a 1.75-to-1 ratio, which it failed to do for the months of January and February.
The company succeeded in discussions with Bridge Bank, which extended the loan’s maturity date to July 3. TranSwitch is in on-going talks with the bank to extend the maturity date for another year or two, Bosi adds.
TranSwitch is based in Shelton, Conn., with research and development (R&D) offices in Israel and India, and has 106 employees. The company’s R&D expenses decreased $3 million from 2011, as a result of workforce reductions, which were put in place as part of restructuring plan implemented in the first and third quarters of 2011, as well as the second quarter of 2012.
TranSwitch has suffered from declining revenue, due to reduced telecom infrastructure capital expenditures, according to the company. In 2012, the chip maker’s total net revenue was $17.9 million, down 37 percent from the $28.3 million it earned in 2011.
As of Dec. 31, 2012, the company had $2.4 million in backlog (anticipated orders to be shipped as well as billable service revenue from existing contracts, over the following 12 months). That represents a significant decline from the company’s $4.3 million for 2011.
TranSwitch’s gross profit was $12 million for the year ended Dec. 31, 2012, compared with $17.9 million for the previous year.
The company is consistently working to restructure its debt, Bosi pledges.
Distressed Company Watch
Others that have recently indicated doubt about continuing as going concerns in SEC filings include:
-Alexza Pharmaceuticals Inc., a Mountain View, Calif.-based company that develops medications to treat biopolar disorder, migraines, pain, seizures and insomnia
-CorMedix Inc., a Bridgewater, N.J.-based specialty pharmaceutical company that makes products to treat cardiac, renal and infectious diseases
-Omphalos Corp., a circuit board equipment supplier headquartered in China
-Pedevco Corp., an oil and gas production company based in Danville, Calif.
-Proguard Acquisition Corp., a Fort Lauderdale, Fla.-based business-to-business wholesaler
-Tranzyme Inc., a late-stage biopharmaceutical company headquartered in Durham, N.C. that develops medication for chemotherapy-induced diarrhea and metabolic diseases
-True Drinks Holdings Inc., an Irvine, Calif.-based company that makes beverages, which are free from artificial coloring
-Vuzix Corp., a video-eyewear company headquartered in Rochester N.Y.
-You On Demand Holdings, a Boulder, Colo. company that provides video-on-demand services
Tune in next Tuesday for more restructuring coverage.