DEFA14A: Venus Concept Clarifies Proxy Statement on Convertible Note Exchange and Debt Restructuring Success

Venus Concept Inc. has issued a supplement to its 2025 Annual and Special Meeting proxy statement, clarifying Proposal No. 6 related to the issuance of common stock upon conversion of new Secured Subordinated Convertible Notes, which were part of a debt restructuring initiative that reduced outstanding debt by approximately $50 million and cured a Nasdaq listing deficiency.

Summary

• The document is a supplement to Venus Concept Inc.'s definitive proxy statement filed on April 30, 2025, for the Annual and Special Meeting of Stockholders to be held on June 25, 2025.
• It clarifies Proposal No. 6, which seeks stockholder approval for the issuance of up to 64,454 shares of common stock upon conversion of the "October 2023 Convertible Notes."
• The terms "October 2023 Convertible Note" or "October 2023 Convertible Notes" as used in the Proxy Statement are intended to encompass the "New Notes" issued on March 31, 2025, as part of a 2025 Exchange.
• In the 2025 Exchange, investors exchanged Secured Subordinated Convertible Notes (Old Notes) with an aggregate outstanding balance of $28,015,827.33 for replacement Secured Subordinated Convertible Notes (New Notes) with an aggregate original principal amount of $17,015,808.33.
• The New Notes are identical to the Old Notes, except for a reduction in outstanding balance, the addition of a minimum liquidity covenant requiring an average daily deposit balance of at least $3,000,000 in investor-controlled accounts, and other immaterial changes.
• This exchange transaction was a critical part of a larger debt restructuring initiative commenced in 2024.
• The initiative successfully reduced the company's outstanding debt by approximately $50 million and cured a Nasdaq Capital Market listing deficiency related to total stockholders' equity.
• The current conversion rate for the October 2023 Convertible Notes is 3.78788 shares of common stock per $1,000 principal amount, representing a conversion price of $264 per share.
• The notes accrue interest at a rate of 3-month adjusted term Secured Overnight Financing Rate (SOFR) plus 8.50% per annum, with an increase of 4.00% per annum in case of an event of default.
• Interest is payable in kind in arrears on the last business day of each calendar quarter, and the notes mature on December 9, 2026.
• The Board unanimously recommends a vote FOR Proposal No. 6 to approve the issuance of shares upon conversion of the October 2023 Convertible Notes.

Sentiment

Score: 7

Explanation: The document highlights a successful debt restructuring that significantly reduced outstanding debt and resolved a Nasdaq listing deficiency, which are strong positives. However, the necessity of such a restructuring and the introduction of a new liquidity covenant indicate the company is still navigating financial challenges. The unanimous board recommendation for the proposal is a positive sign of internal alignment.

Positives

• The company's debt restructuring initiative successfully reduced outstanding debt by approximately $50 million.
• The initiative cured a Nasdaq Capital Market listing deficiency related to total stockholders' equity, improving compliance and financial standing.
• The Board unanimously recommends approval of Proposal No. 6, indicating strong internal support for the transaction and its benefits.

Negatives

• The New Notes include a minimum liquidity covenant requiring the Company to maintain an average daily deposit balance of at least $3,000,000 in investor-controlled accounts, which imposes a specific financial obligation and potential restriction on cash management.
• The interest rate on the convertible notes increases by 4.00% per annum upon an event of default, indicating a penalty for non-compliance with terms.

Risks

• Failure to maintain the minimum liquidity covenant of $3,000,000 average daily deposit balance could trigger an event of default under the New Notes.
• An event of default under the October 2023 Convertible Notes would result in a 4.00% per annum increase in the interest rate, increasing debt service costs.
• The need for stockholder approval for the issuance of shares upon conversion of the notes implies a risk of non-approval, which could complicate the debt restructuring and Nasdaq compliance.
• The company previously faced a Nasdaq Capital Market listing deficiency related to total stockholders' equity, indicating past financial challenges that could recur.

Future Outlook

The company is seeking stockholder approval for the issuance of shares related to the convertible notes, which is a critical step in its ongoing debt restructuring efforts aimed at strengthening its balance sheet and maintaining Nasdaq listing compliance. The notes mature on December 9, 2026, indicating a medium-term financial obligation that will need to be managed.

Management Comments

• "We pursued the exchange transaction as part of a larger debt restructuring initiative that commenced in 2024."
• "We undertook such initiative to reduce our debt, thereby strengthening our balance sheet, and to cure a listing deficiency on the Nasdaq Capital Market relating to our total stockholders equity."
• "The initiative, of which the exchange transaction formed a critical part, reduced our outstanding debt by approximately $50 million and cured such listing deficiency."
• "The Board unanimously recommends a vote FOR Proposal No. 6 to approve the issuance of up to 64,454 shares of common stock upon conversion of the October 2023 Convertible Notes."

Industry Context

NA

Corporate Governance

Stakeholder Impact

• Shareholders: Potential dilution from the issuance of up to 64,454 shares upon conversion of the notes. Benefit from the company's improved balance sheet and cured Nasdaq listing deficiency. Required to vote on Proposal No. 6.
• Investors (Convertible Note Holders): Exchanged Old Notes for New Notes, which include a new minimum liquidity covenant. Benefit from the debt restructuring and continued interest payments.
• Company (Venus Concept Inc.): Strengthened balance sheet through debt reduction, cured Nasdaq listing deficiency, but now subject to a new liquidity covenant.
• Nasdaq Capital Market: Listing deficiency cured, indicating compliance with listing standards.

Next Steps

• Stockholders are encouraged to carefully read this Supplement together with the original Proxy Statement.
• Stockholders are encouraged to submit their proxy or voting instructions as soon as possible for the upcoming meeting.
• The Annual and Special Meeting of Stockholders will be held on Wednesday, June 25, 2025, at 8:00 a.m. Eastern Daylight Time.
• Pending stockholder approval, the company will proceed with the issuance of up to 64,454 shares of common stock upon conversion of the October 2023 Convertible Notes.

Key Dates

Recommendation

Keywords

Venus Concept, SEC Filing, DEFA14A, Proxy Statement, Convertible Notes, Debt Restructuring, Nasdaq Listing Rule 5635(b), Stockholder Meeting, Corporate Governance, Financial Health, Liquidity Covenant, Secured Subordinated Convertible Notes