Form 4: Venus Concept Restructures Debt with Madryn Asset Management, Exchanging Notes for New Debt and Convertible Preferred Stock

Venus Concept Inc. has restructured its capital obligations by exchanging existing secured subordinated convertible notes held by Madryn Asset Management and its affiliates for new notes and Series Y Convertible Preferred Stock.

Summary

• Venus Concept Inc. (VERO) engaged in a capital restructuring transaction with Madryn Asset Management, LP, Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, and Madryn Health Advisors, LP, who are 10% owners and potentially directors.
• The transaction involved the exchange of existing secured subordinated convertible notes with an aggregate principal amount of $17,015,808.30.
• In exchange, the reporting persons received new secured subordinated convertible notes totaling $11,096,478.80.
• Additionally, 325,651 shares of Series Y Convertible Preferred Stock were issued as part of the exchange.
• The new notes are convertible into Common Stock at a rate of 3.7878788 shares of Common Stock for each $1,000 principal amount, potentially yielding 42,032 shares of Common Stock.
• Each share of Series Y Preferred Stock is convertible into 9.0909 shares of Common Stock at the holder's option or automatically upon certain conditions, including the company's completion of a $30.0 million common equity raise, potentially yielding 2,960,461 shares of Common Stock.
• The Series Y Preferred Stock is perpetual and has no expiration date, while the new secured subordinated convertible notes expire on December 9, 2026.

Sentiment

Score: 6

Explanation: The restructuring reduces the principal amount of notes, which is positive for debt management. However, the introduction of convertible preferred stock and the explicit mention of a future $30 million equity raise introduce potential dilution and future financing needs, balancing the sentiment to moderately positive.

Positives

• The transaction reduces the aggregate principal amount of secured subordinated convertible notes from $17,015,808.30 to $11,096,478.80, potentially easing future debt servicing requirements.
• Restructuring existing debt obligations can provide financial flexibility and potentially extend maturities.

Negatives

• The issuance of 325,651 shares of Series Y Convertible Preferred Stock introduces a new class of equity-like securities with conversion rights, potentially leading to future dilution for common shareholders.
• The automatic conversion of Series Y Preferred Stock is contingent on a $30.0 million common equity raise, indicating a potential need for significant future capital infusion.

Risks

• Potential significant dilution for existing common shareholders upon conversion of the new secured subordinated convertible notes and Series Y Convertible Preferred Stock.
• The company's ability to complete a $30.0 million common equity raise, which is a condition for automatic conversion of the Series Y Preferred Stock, poses a future financing risk.

Future Outlook

The Series Y Preferred Stock is convertible into Common Stock automatically upon the company's completion of a $30.0 million common equity raise, indicating a future financing event is anticipated.

Management Comments

• Madryn Asset Management, LP, Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, and Madryn Health Advisors, LP disclaim beneficial ownership of the securities reported, except to the extent of their pecuniary interest therein.
• John Ricciardi signed as an Authorized Signatory for all Madryn reporting entities.

Industry Context

This transaction represents a capital structure adjustment, a common practice for companies to manage their debt and equity profiles, often to improve liquidity or extend maturities, particularly in the medical aesthetics or healthcare technology sectors where capital needs can be significant.

Comparison to Industry Standards

• NA

Related Party Transactions

• The transaction involves Madryn Asset Management and its affiliates, who are identified as 10% owners and potentially directors of Venus Concept Inc., making this an exchange with a related party.

Stakeholder Impact

• Shareholders face potential future dilution from the conversion of the new notes and Series Y Preferred Stock into common stock.
• Holders of the existing secured subordinated convertible notes are directly impacted by the exchange of their debt instruments for new notes and preferred stock.

Next Steps

• Potential completion of a $30.0 million common equity raise, which would trigger the automatic conversion of Series Y Preferred Stock into Common Stock.

Key Dates

Keywords

Venus Concept, VERO, SEC Form 4, convertible notes, preferred stock, debt exchange, capital structure, Madryn Asset Management, equity raise, dilution