Form 4: Avenue Capital Affiliates Amend Convertible Debt Terms with Eyenovia, Limiting Equity Conversion to 9.99%

Avenue Capital Management II, L.P. and its affiliated funds have amended their loan agreement with Eyenovia, Inc., allowing conversion of up to $10 million in debt into common stock at $1.68 per share, subject to a 9.99% beneficial ownership cap.

Summary

• Avenue Capital Management II, L.P. and its affiliated funds (Avenue Venture Opportunities Fund, L.P. and Avenue Venture Opportunities Fund II, L.P.) are significant owners of Eyenovia, Inc. (EYEN), holding 30,619 shares of common stock and convertible debt.
• The convertible debt can be exchanged for 5,952,381 shares of common stock at a conversion price of $1.68 per share.
• On February 21, 2025, a Second Amendment to the Loan and Security Agreement was executed, granting the lenders the right to convert up to $10,000,000 of outstanding Growth Capital Loans into common stock at $1.68 per share, effective on or after April 1, 2025.
• A subsequent Third Amendment, dated May 30, 2025, introduced a 9.99% beneficial ownership limitation on Eyenovia's common stock for any debt conversion by the Funds.
• As a result of this limitation, the Reporting Persons are no longer subject to Section 16 reporting obligations.
• No debt has been converted to date by the Reporting Persons.
• Marc Lasry is identified as the ultimate beneficial owner of the securities held by the Funds.

Sentiment

Score: 6

Explanation: The filing is a routine disclosure of changes to beneficial ownership and terms of existing convertible debt. The introduction of a beneficial ownership limitation is a neutral to slightly positive governance measure, while the lack of conversion to date could be seen as slightly negative depending on the current stock price relative to the conversion price. Overall, it's a factual update with no immediate strong positive or negative implications for the company's operations or financial health beyond the financing structure.

Positives

• The agreement provides a clear conversion price of $1.68 per share for the convertible debt, offering a potential pathway for the lenders to realize value.
• The 9.99% beneficial ownership limitation may reduce concerns about excessive dilution from a single large investor, potentially stabilizing the share structure.

Negatives

• The 9.99% beneficial ownership limitation restricts the extent to which the lenders can convert their debt into equity, potentially limiting their upside participation if the stock price significantly increases.
• The fact that no debt has been converted to date, despite the conversion right being active from April 1, 2025, could suggest that the current market price is not favorable for conversion relative to the $1.68 conversion price.

Risks

• The 9.99% beneficial ownership limitation could prevent the full conversion of the $10,000,000 Growth Capital Loans into common stock if the company's market capitalization is too low, potentially leaving a portion of the debt unconverted.
• Future stock price volatility could impact the attractiveness of the $1.68 conversion price, affecting the lenders' decision to convert their debt.

Future Outlook

The document indicates that lenders have the right to convert debt into common stock on or after April 1, 2025, subject to a 9.99% beneficial ownership limitation. The actual conversion will depend on the lenders' discretion and market conditions.

Industry Context

This filing reflects a common financing strategy for growth-stage companies like Eyenovia, where convertible debt provides capital while offering investors potential equity upside. The amendment to include a beneficial ownership limitation is a standard practice to manage dilution and maintain compliance with certain regulatory thresholds.

Comparison to Industry Standards

• The use of convertible debt is a common financing instrument for biotechnology or pharmaceutical companies like Eyenovia, which often require significant capital for R&D and clinical trials.
• A conversion price of $1.68 per share, relative to the company's current stock price (not provided in the document, but implied by the lack of conversion), would be assessed against peer company valuations and recent financing rounds in the ophthalmic drug development sector.
• The 9.99% beneficial ownership limitation is a standard provision often included in such agreements to prevent a single investor from exceeding certain ownership thresholds that could trigger additional regulatory requirements or change of control provisions. This is a common practice seen in similar agreements with small-cap biotech companies raising capital from institutional investors.

Corporate Governance

Related Party Transactions

• The filing details transactions and agreements between Eyenovia, Inc. and Avenue Capital Management II, L.P. and its affiliated funds (Avenue Venture Opportunities Fund, L.P. and Avenue Venture Opportunities Fund II, L.P.), which are 10% owners and have a director relationship with the Issuer. Marc Lasry, the ultimate beneficial owner, also has a director relationship.

Stakeholder Impact

• Shareholders: The 9.99% beneficial ownership limitation could reduce concerns about excessive dilution from a single large investor. The potential conversion of debt to equity could increase the number of outstanding shares.
• Creditors (Lenders): The terms of their convertible debt have been amended, providing a clear conversion price and a beneficial ownership cap. Their ability to convert is now limited by this cap.
• Management: The company's financing structure is clarified, and the beneficial ownership limitation provides a framework for managing equity dilution from this specific debt.

Next Steps

• Lenders (Avenue Venture Opportunities Fund, L.P. and Avenue Venture Opportunities Fund II, L.P.) may exercise their right to convert up to $10,000,000 of Growth Capital Loans into common stock at $1.68 per share on or after April 1, 2025, subject to the 9.99% beneficial ownership limitation.

Key Dates

Keywords

Eyenovia, EYEN, Avenue Capital, Convertible Debt, SEC Form 4, Beneficial Ownership, Growth Capital Loans, Equity Conversion, Marc Lasry, Investment Management, Financial Reporting