SCHEDULE 13D/A: Madryn Asset Management Boosts Venus Concept Stake Amidst Debt Restructuring Efforts

Madryn Asset Management, a significant lender and investor, has increased its beneficial ownership in Venus Concept Inc. to 8.6% and is actively pursuing a comprehensive debt and equity capital structure restructuring.

Summary

• Madryn Asset Management, LP and its affiliates (the "Reporting Persons") beneficially own 174,735 shares of Venus Concept Inc. Common Stock, representing approximately 8.6% of the outstanding shares.
• The Reporting Persons acquired their stake through a series of financing transactions, including credit agreements, warrants, and conversions of secured subordinated convertible notes into common and preferred stock.
• The aggregate purchase price of Common Stock held directly by the Funds was approximately $15,475,268.
• Key transactions include the exchange of $26,695,110.54 in 2020 Convertible Notes for 2023 Convertible Notes ($22,791,748.32 principal) and 248,755 shares of Series X Preferred Stock in October 2023.
• Further exchanges in May and September 2024 involved converting $35,000,000 and $15,000,000, respectively, of senior indebtedness under the MSLP Loan Agreement into Series Y Preferred Stock.
• In March 2025, the 2023 Convertible Notes were exchanged for $17,015,808.33 in 2025 Convertible Notes and 379,311 shares of Series Y Preferred Stock.
• The Reporting Persons have submitted a non-binding proposal to restructure the Company's debt and equity, which could result in them becoming majority owners on a fully diluted basis.
• A shareholder meeting is required by June 30, 2025, to approve the issuance of shares underlying the 2025 Convertible Notes, Series X Preferred Stock, and Series Y Preferred Stock, due to Nasdaq Capital Market limitations on convertibility.
• The beneficial ownership percentage excludes a significant number of shares (over 10 million) issuable upon conversion of preferred stock and convertible notes due to current Nasdaq convertibility limitations.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative. While an active investor like Madryn engaging in restructuring can be a positive for long-term viability, the underlying necessity for such extensive debt-to-equity conversions and a comprehensive restructuring proposal indicates significant financial distress for Venus Concept Inc. The uncertainty of the proposal's consummation and Nasdaq convertibility limitations add to the negative outlook.

Positives

• Madryn Asset Management is taking an active role in working with Venus Concept's management and board on operational, financial, and strategic initiatives, including evaluating strategic alternatives.
• The Reporting Persons have proposed a comprehensive restructuring of the Company's debt and equity capital structure, which could provide financial stability.
• The acquisition of the entire outstanding MSLP Loan by the Funds from City National Bank of Florida centralizes a significant portion of the Company's debt with a single, engaged investor.

Negatives

• The Company's need for repeated debt-to-equity conversions and a comprehensive restructuring proposal indicates significant financial challenges.
• Limitations imposed by Nasdaq Capital Market rules prevent the immediate conversion of a substantial number of shares underlying preferred stock and convertible notes, creating uncertainty.
• The proposed restructuring is non-binding and subject to negotiation, execution of definitive documentation, successful equity financing, and requisite stockholder consents, meaning there is no assurance of its consummation.
• The varying issuance prices for Series Y Preferred Stock ($60.66, $73.68, $29.00) suggest fluctuating valuations or specific deal terms reflecting the Company's financial state.

Risks

• Uncertainty regarding the successful negotiation and consummation of the proposed debt and equity restructuring plan.
• Potential for significant dilution to existing common stockholders if the proposed restructuring, which could make Madryn majority owners, is completed.
• Limitations on convertibility imposed by Nasdaq Capital Market rules may hinder the Company's ability to fully convert outstanding preferred stock and notes, impacting its capital structure.
• The Company's ongoing financial distress, as evidenced by the need for multiple debt-to-equity conversions and a comprehensive restructuring proposal.

Future Outlook

The Reporting Persons intend to continue their active role in working with Venus Concept's management and board on strategic initiatives, including the evaluation of potential strategic alternatives. They have proposed a non-binding restructuring of the Company's debt and equity capital structure, which, if consummated, would make them majority owners. The Company is also required to hold a shareholder meeting by June 30, 2025, to approve the issuance of shares underlying various convertible securities due to Nasdaq limitations.

Management Comments

• "The Reporting Persons acquired the securities reported herein for investment purposes."
• "In their capacity as a significant stockholder of the Company, the Reporting Persons have taken and intend to continue to take an active role in working with the Company's management and the board of directors on operational, financial and strategic initiatives."
• "The Reporting Persons intend to review their investments in the Company on a continuing basis."
• "The Reporting Persons may, from time to time, acquire or cause affiliates to acquire additional shares of Common Stock or other securities of the Company... dispose... or continue to hold... Common Stock or other securities of the Company."
• "The Reporting Persons have engaged and intend to continue engaging in discussions with management or the board of directors of the Company about its business, operations, strategy, plans and prospects."
• "The Reporting Persons have engaged and intend to continue engaging in discussions with management, the board of directors of the Company, stockholders or other securityholders of or lenders to the Company and other relevant parties or take other actions concerning the offering and sale of securities by the Company or other financing transactions by the Company, any extraordinary corporate transaction... a sale or transfer of a material amount of assets, a change in the board of directors or management, a material change in the capitalization or dividend policies, other material changes in the Company's business or corporate structure, changes in the Company's charter, bylaws or other actions that may impede the acquisition of control, de-listing or de-registration of the Issuer, or similar actions."
• "There can be no assurance that a definitive agreement with respect to the Proposal will be executed or, if executed, whether the transaction will be consummated."

Industry Context

This filing primarily details an investor's strategic stake and debt restructuring efforts within a single company, Venus Concept Inc., and does not provide broader industry trends or competitive analysis.

Corporate Governance

Related Party Transactions

• The various exchange agreements (2020, 2023, May 2024, September 2024, 2025) and the Credit Agreement are between Venus Concept Inc. (or its predecessors/subsidiaries) and the Madryn Funds, which are significant lenders and now major stockholders. These transactions involve the conversion of substantial debt into equity and preferred stock, representing significant dealings between the Company and a related party with substantial influence.

Stakeholder Impact

• **Shareholders**: Potential for significant dilution if the proposed restructuring, which could make Madryn majority owners, is completed. Current shareholders face uncertainty regarding the value of their holdings due to ongoing financial challenges and Nasdaq convertibility limitations. A shareholder meeting is required for approval of share issuances.
• **Creditors (Madryn Funds)**: The Madryn Funds are converting substantial debt into equity and preferred stock, indicating a shift in their investment strategy from pure debt to a more equity-oriented position, potentially reflecting a belief in the Company's long-term recovery under their influence.
• **Employees**: While not directly mentioned, a comprehensive restructuring could lead to operational changes that might impact employees.
• **Customers/Suppliers**: No direct impact mentioned, but the Company's financial health and strategic direction could indirectly affect its ability to serve customers or maintain supplier relationships.

Next Steps

• Ongoing discussions between the Company and the Reporting Persons regarding the implementation of the proposed restructuring and alternatives.
• Negotiation and execution of definitive documentation for the proposed restructuring.
• Company to hold a meeting of shareholders no later than June 30, 2025, to approve the issuance of shares underlying the 2025 Convertible Notes, Series X Preferred Stock, and Series Y Preferred Stock, as required by Nasdaq rules.
• Potential completion of an equity financing by the Company as a condition for the proposed restructuring.

Key Dates

Keywords

Venus Concept Inc., Madryn Asset Management, SEC Schedule 13D, Debt Restructuring, Equity Financing, Convertible Notes, Preferred Stock, Beneficial Ownership, Corporate Governance, Nasdaq Compliance, Investment Fund, Healthcare Technology