SCHEDULE: Madryn Funds Consolidate Control of Venus Concept with 85.5% Stake Following Latest Debt-to-Equity Exchange

Madryn Asset Management and its affiliated funds have significantly increased their beneficial ownership in Venus Concept Inc. to 85.5% through a series of debt-to-equity exchanges, including a recent conversion of $11.1 million in convertible notes and acquisition of Series Y Preferred Stock.

Summary

• Madryn Asset Management and its affiliated funds (Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, and Madryn Health Advisors, LP) collectively beneficially own 10,869,529 shares of Venus Concept Inc. Common Stock, representing approximately 85.5% of the outstanding shares.
• This ownership stake was primarily achieved through a series of debt-to-equity exchange agreements, with the latest occurring on June 30, 2025.
• On June 30, 2025, the Funds exchanged $11,096,478.93 principal amount of 2025 Convertible Notes for new 2025 Convertible Notes and 325,651 shares of Series Y Preferred Stock.
• The initial conversion price for the New 2025 Convertible Notes is $264 per share of Common Stock, with a conversion rate of 3.7878788 shares per $1,000 principal amount.
• Shares of Series Y Preferred Stock issued in recent exchanges were priced at $60.66 (May 2024), $73.68 (September 2024), $29.00 (March 2025), and $19.96 (June 2025) per share.
• Each Series Y Preferred Stock share is convertible into 9.0909 shares of Common Stock and carries a liquidation preference equal to 2.0 times its issuance price, senior to other capital stock.
• On June 25, 2025, Venus Concept shareholders approved the issuance of Common Stock underlying the New 2025 Convertible Notes, Series X Preferred Stock, and Series Y Preferred Stock, removing prior Nasdaq convertibility limitations.
• The Reporting Persons acquired the securities for investment purposes and intend to take an active role in the Company's operational, financial, and strategic initiatives, including evaluating strategic alternatives.
• A non-binding proposal was delivered on May 3, 2024, by the Reporting Persons to restructure the Company's debt and equity capital structure, which could result in the Reporting Persons becoming majority owners on a fully diluted basis.

Sentiment

Score: 3

Explanation: The document indicates a company in significant financial distress, undergoing multiple debt-to-equity conversions and proposing a comprehensive restructuring that would lead to a change in control. While the investor's active involvement could be seen as a positive for stabilization, the underlying financial issues and declining preferred stock issuance prices suggest a negative outlook for existing common shareholders.

Positives

• Madryn's active involvement suggests a commitment to improving Venus Concept's operational, financial, and strategic direction.
• The series of debt-to-equity conversions and the proposed restructuring indicate a concerted effort to address the Company's debt burden and stabilize its capital structure.
• Shareholder approval on June 25, 2025, to remove Nasdaq convertibility limitations for underlying shares facilitates future conversions and potentially simplifies the capital structure.

Negatives

• The ongoing need for debt-to-equity conversions and restructuring proposals suggests significant financial challenges and a distressed capital structure for Venus Concept.
• The decreasing issuance prices for Series Y Preferred Stock in successive exchanges ($60.66, $73.68, $29.00, $19.96) indicate a declining valuation or increasing dilution for new equity.
• The high beneficial ownership of 85.5% by the Reporting Persons, while providing stability, also implies a highly concentrated ownership structure, potentially limiting liquidity for other shareholders.
• The non-binding nature of the restructuring proposal means there is no assurance of a definitive agreement or consummation of the proposed transactions.

Risks

• Uncertainty regarding the outcome and timing of discussions concerning the proposed debt and equity restructuring.
• Potential for further dilution for existing common stockholders if more debt is converted into equity or new equity is issued at lower valuations.
• The Company's financial position and strategic direction remain subject to ongoing evaluation and potential changes by the Reporting Persons.
• Compliance with applicable listing standards, laws, and regulations, especially given the prior Nasdaq convertibility limitations.

Future Outlook

The Reporting Persons intend to continue reviewing their investments and may acquire or dispose of additional securities. They plan to remain actively engaged with Venus Concept's management and board on operational, financial, and strategic initiatives, including evaluating potential strategic alternatives. A non-binding proposal for a comprehensive debt and equity capital structure restructuring, which could result in the Reporting Persons becoming majority owners, has been delivered, though there is no assurance of its consummation.

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, including in connection with the evaluation by the Company's board of directors of potential strategic alternatives.
• 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... of some or all of their Common Stock or other securities... or continue to hold... Common Stock or other securities.
• 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 (including, but not limited to, a merger, reorganization, recapitalization or liquidation), 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.
• While the Reporting Persons have engaged in discussions with the Company to agree the terms of the transactions contemplated by the Proposal and alternatives to such transactions, there is no certainty as to the outcome of such discussions, or as to the timing for execution of any definitive agreement.
• As of the date hereof, no agreement has been reached nor has any definitive documentation been entered into by the Company and the Reporting Persons with respect to the transactions contemplated by the Proposal or alternatives to such transactions.

Industry Context

The series of debt-to-equity conversions and the proposed comprehensive restructuring by a major investor like Madryn suggest that Venus Concept Inc., operating in the medical aesthetics or medical device industry, is likely facing significant financial distress. Such capital structure overhauls are common in industries where companies struggle with profitability, high debt burdens, or rapid technological changes requiring substantial capital, often leading to a shift in control to major creditors or investors.

Corporate Governance

Related Party Transactions

• The series of exchange agreements (2020, 2023, May 2024, September 2024, March 2025, June 2025) between Venus Concept Inc. and the Madryn Funds constitute related party transactions, as the Funds are significant lenders and now majority beneficial owners.
• The purchase of the entire outstanding principal amount of the MSLP Loan by the Funds from City National Bank of Florida on April 23, 2024, is a transaction involving the Reporting Persons as a major creditor.
• The non-binding transaction proposal for a comprehensive debt and equity restructuring, which would result in the Reporting Persons becoming majority owners, is a significant proposed related party transaction.

Stakeholder Impact

• Shareholders: Existing common shareholders face significant dilution due to the conversion of debt and preferred stock into common equity, and the potential for further dilution if the proposed restructuring proceeds. The declining issuance prices of Series Y Preferred Stock suggest a diminishing value for their holdings.
• Creditors (other than Madryn Funds): The restructuring efforts, particularly the conversion of senior indebtedness (MSLP Loan) into preferred stock, could alter the Company's debt profile and potentially impact the recovery prospects for other creditors, though the document doesn't detail other creditors.
• Company Management/Board: The Reporting Persons intend to take an active role in working with management and the board on strategic initiatives, indicating increased oversight and influence from the major investor.
• Employees/Customers/Suppliers: The document does not directly address the impact on these groups, but a stabilized capital structure (if successful) could provide more long-term stability for the business, indirectly benefiting these stakeholders. However, ongoing financial distress could also lead to operational challenges.

Next Steps

• Reporting Persons will continue to review their investments in the Company.
• Reporting Persons may acquire or dispose of additional shares of Common Stock or other securities of the Company.
• Reporting Persons intend to continue engaging in discussions with management and the board on operational, financial, and strategic initiatives.
• Discussions will continue regarding the implementation of the proposed debt and equity restructuring or alternatives to such transactions.

Key Dates

Recommendation

Keywords

Venus Concept Inc., Madryn Asset Management, SEC Filing, Schedule 13D, Debt Restructuring, Convertible Notes, Preferred Stock, Series Y Preferred Stock, Series X Preferred Stock, Equity Financing, Shareholder Approval, Beneficial Ownership, Corporate Governance, Strategic Alternatives, Capital Structure, Nasdaq Capital Market