Neofect, a company specializing in digital rehabilitation, is facing financial troubles as it failed to pay back the principal plus interest.

According to the company, it has failed to pay back the principal and interest worth 3.3 billion won ($2.3 million), which is equivalent to 21.5 percent of the company's equity capital (15.3 billion won).

Neofect is reviewing the method of repaying the loan by negotiating with creditors and agreeing to pay off the debts by Nov. 30.

While the company stressed that it plans to pay back a portion of the loan (2.97 billion won) using its illiquid assets, investors are expressing concerns as this is not the first time the company faced financial troubles.

Founded in 2010, Neofect produces medical devices and contents that help patients with nervous systems and musculoskeletal disorders based on artificial intelligence (AI) technology. The company was listed on the Kosdaq market through the "special technology listing" system in 2018.

The system alleviates certain listing requirements, such as having to satisfy certain profit requirements, for Kosdaq listing applicants based on their technological power and growth potential.

The company has sold products mainly to local hospitals and clinics but it never recorded an operating income so far. 

At the time of its initial public offering (IPO), Neofect had planned to record 30.2 billion won and 9.8 billion won  in sales and operating profit, respectively, by 2020.

However, the business results fell short of its expectations. The company posted only 18.6 billion won in sales, and 14.2 billion won in operating loss, in 2020. 

In the first half of 2022, its revenue and operating loss recorded6.6 billion won and 1.7 billion won, respectively. 

As the financial risk burden grew, Neofect succeeded in temporarily relieving its financial risk by conducting a capital increase of 18.6 billion won in 2020.

However, investors requested early repayment, which has led to the recent financial crunch.

"Since we have more non-current assets than necessary for repayment and can raise additional funds, we will pay the principal and interest without any setbacks by the end of next month," a company official said. "Along with financial improvement activities, we will expand sales and maximize profitability through sales revitalization, and strengthen our sales network mainly in Europe and the U.S., where demand for innovative medical devices is high."

Despite the company's explanation, the market reacted negatively toward the news. At the market close on Tuesday, the company's shares ended at 1,100 won, down 10.20 percent from the previous trading day.