8-K: Endovia Health Sciences Issues Convertible Note

Endovia Health Sciences, Inc. has issued a secured convertible promissory note to C/M Capital Master Fund, LP, for $510,000, with provisions for conversion into common stock and specific repayment terms.

Summary

• Endovia Health Sciences, Inc. (the Company) has entered into a Letter Agreement with C/M Capital Master Fund, LP (the Investor) and has issued a secured convertible promissory note (the Note).
• The Note has an original principal amount of $576,271.19, with a loan amount of $510,000, issued at an original issue discount.
• The Note is convertible into shares of the Company's Common Stock at a conversion price of the lower of $1.75 per share or $0.01 above the closing sale price on the conversion date.
• The Note matures 12 months after the issuance date, on September 18, 2027.
• Interest accrues at 7% per annum upon an Event of Default, compounded quarterly and payable quarterly in arrears.
• The Note is secured by a security agreement covering all of the Company's assets.
• The Company must apply 30% of gross cash proceeds from the issuance of securities under the ELOC Agreement to repay the Note.
• The Note includes various covenants, including restrictions on incurring senior or pari passu indebtedness and requirements for maintaining sufficient authorized shares for conversion.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative development due to the issuance of a convertible note with potentially dilutive terms and significant covenants, indicating potential financial strain.

Positives

• Secured $510,000 in initial investment from C/M Capital Master Fund, LP.
• The Note is convertible into common stock, offering potential upside for the investor.
• The Company may prepay the Note without premium or penalty.
• The Note is secured by all of the Company's assets, providing collateral for the investor.

Negatives

• The Note was issued with an original issue discount of $66,271, reducing the effective proceeds.
• The conversion price is subject to adjustments, potentially leading to significant dilution for existing shareholders.
• The Note is secured by all of the Company's assets, potentially impacting other creditors.
• The Company is restricted from incurring indebtedness that is senior to or pari passu with the Note.
• Failure to meet listing requirements or obtain stockholder approval for share issuance constitutes an Event of Default, leading to a 5% per annum interest rate increase.
• The Note includes various covenants that could restrict the Company's future operations and financing activities.

Risks

• Potential for significant dilution of existing shareholders' equity due to the conversion feature.
• The Company's assets are pledged as collateral, which could impact its ability to secure future financing or be subject to liquidation in case of default.
• Strict covenants related to indebtedness, asset sales, and corporate structure could limit the Company's strategic flexibility.
• Failure to obtain necessary stockholder approvals or maintain listing standards on the NYSE American could trigger an Event of Default and increase interest rates.
• The Company's ability to repay the Note is dependent on future financing and operational success, given the current financial disclosures.

Future Outlook

The Note matures in 12 months, and its conversion into common stock is subject to various conditions and potential adjustments. The Company's ability to meet its obligations under the Note and its ongoing operations are contingent on future financing and regulatory progress, particularly concerning CannEpil.

Management Comments

• The Company has closed the Investors initial investment of $510,000 in exchange for a secured convertible promissory note.
• The Note is convertible into shares of the Companys Common Stock at a conversion price equal to the lower of (i) $1.75 per share and (ii) $0.01 above the closing sale price on the date of conversion.
• The Note matures on September 18, 2027, and bears no interest absent an event of default, whereupon interest accrues at a rate of 7% per annum.
• The Company may prepay the Note at any time and from time to time, in whole or in part, without premium or penalty.
• The Note is subject to mandatory prepayments of 30% from gross proceeds received by the Company from the issuance of securities pursuant to that certain Securities Purchase Agreement dated September 19, 2025 establishing an equity line of credit facility between the Company and the Investor (the ELOC Agreement).

Industry Context

StockSavvy.ai notes that the issuance of convertible debt is a common financing strategy for early-stage or development-stage companies, particularly in the biotechnology and pharmaceutical sectors, to fund research, development, and regulatory processes. However, it often comes with the risk of significant shareholder dilution.

Related Party Transactions

• The Note is issued to C/M Capital Master Fund, LP, which is identified as the Investor. The relationship between the Company and the Investor is detailed in the Letter Agreement and the Exclusive License Agreement.

Stakeholder Impact

• Shareholders: Potential for significant dilution due to the conversion of the Note into common stock. The terms of conversion and potential adjustments could negatively impact existing ownership percentages.
• Creditors: The Note is secured by all of the Company's assets, potentially ranking senior to or pari passu with other existing or future indebtedness, which could affect the recovery prospects of other creditors.
• The Investor (C/M Capital Master Fund, LP): Receives a secured convertible note with priority over most existing and future indebtedness, offering potential for equity upside and downside protection through security.

Next Steps

• The Company must comply with the terms of the Note, including covenants related to indebtedness, asset sales, and maintaining sufficient authorized shares.
• The Company is obligated to apply 30% of proceeds from future ELOC Agreement issuances to repay the Note.
• The Note matures on September 18, 2027, at which point the outstanding principal, accrued interest, and other amounts must be paid.
• The Investor may convert the Note into shares of Common Stock, subject to beneficial ownership limitations and NYSE American listing requirements.
• The Company must submit a Supplemental Listing Application (SLAP) to the NYSE American and seek stockholder approval for share issuances exceeding 19.99%.

Key Dates

Recommendation

The issuance of a convertible note with a discount and security interest suggests potential financial challenges and a need for capital. While the conversion feature offers upside, the dilutive potential and restrictive covenants warrant caution. A 'hold' recommendation reflects a neutral stance pending further clarity on the company's operational progress and ability to manage its debt obligations.

Keywords

convertible note, secured debt, financing, capital raise, promissory note, dilution, C/M Capital Master Fund, Endovia Health Sciences