PRN 2022.08.26 Convertible Financing Signed Press Release
ProSomnus® Sleep Technologies Announces Signing of Definitive Agreements for $30 Million of Convertible Notes
Financing will support Company’s pending business combination and fund strategic growth initiatives
San Francisco, Calif. – August 26, 2022 – ProSomnus Sleep Technologies (“ProSomnus”), the leader in patient-preferred medical devices for the treatment of Obstructive Sleep Apnea (OSA), today announced the execution of definitive agreements with institutional investors led by funds affiliated with or managed by Cohanzick Management, LLC and CrossingBridge Advisors, LLC. The financing will support the previously announced, pending merger of ProSomnus and Lakeshore Acquisition I Corp. (“Lakeshore”). The closing of the convertible notes financing is conditioned upon, among other things, the closing of the business combination prior to December 10, 2022. The notes will be issued by the combined company. The combined company is expected to change its name to ProSomnus, Inc. and its class A common stock is expected to be traded on the Nasdaq Capital Market under the symbol “OSA”.
“The financing is an important step toward closing our business combination with Lakeshore. Together with Lakeshore’s remaining cash in trust, this facility will materially strengthen ProSomnus’s balance sheet as we begin life as a public company later this year,” said Len Liptak, ProSomnus’s Chief Executive Officer. “Taking ProSomnus public is about accessing the resources needed to execute our multi-pronged, strategic growth plan. This facility will be a key component in our ability to drive growth and raise awareness of the value ProSomnus devices bring to patients, physicians and Dental Sleep Medicine providers seeking a more effective treatment for what is a dangerous and highly prevalent disease.”
“We believe ProSomnus is at the forefront of treatment for OSA and anticipate rapid but disciplined growth in the future,” said David Sherman on behalf of the lenders. “We expect ProSomnus devices will deliver significant value-added features that offer improved comfort, efficacy, and other advantages over other intraoral devices and CPAP to users at the highest standard of care. Those competitive advantages will be complemented by the launch of ProSomnus’s next-generation device, which will feature integrated remote monitoring capabilities that will be an important tool for healthcare providers treating OSA patients. We look forward to supporting the company in the coming years.”
Projected Use of Proceeds
As a key component of the pending business combination with Lakeshore, ProSomnus, Inc. intends to use a portion of the proceeds of the facility to fund multiple strategic growth initiatives, many of which are already underway. Among these is the continued growth of the sales team, which will be charged with enhancing ProSomnus’ footprint not only in the core US market, but also expand the Company’s presence outside of the US. The Company also plans to complete the development of its next-generation Oral Appliance Therapy, which features embedded sensors allowing sleep physicians to monitor their patients during the critical night hours. Other initiatives will include investments in next-gen manufacturing techniques, as well as efforts to raise public awareness of OSA and the value-added features of the ProSomnus Oral Appliance Therapy devices.
Key Transaction Terms
The debt being issued to various institutional parties consists of $30 million of debt comprised of two tranches: $15 million of senior secured convertible notes and $15 million of junior secured convertible notes with maturities of 36 months and 40 months, respectively. Post issuance, within 12 months, the debt will be DTC eligible for secondary trading. Neither note has scheduled amortization. The senior debt has an initial conversion price of $13.00, to be reset at 5% premium to market price six and twelve months after closing, subject to a floor. The subordinated debt has an initial conversion price of $11.50, to be reset to a 5% premium to the market price six and twelve months after close and subject to a floor.
Craig-Hallum Capital Group and Roth Capital Partners are acting as joint placement agents on the PIPE. Craig-Hallum Capital Group is acting as M&A advisor to Lakeshore. Solomon Partners and Gordon Pointe Capital, LLC are acting as financial advisors to ProSomnus.
Company Overview
ProSomnus is a pioneer of precision, mass-customized Oral Appliance Therapy devices to treat
Obstructive Sleep Apnea. Precision Oral Appliance Therapy is a new option for treating Obstructive Sleep
Apnea, where each ProSomnus device is highly personalized and digitally manufactured to match the
anatomy and treatment plan for each patient. A growing number of scientific reports indicate
ProSomnus devices as the most effective treatment for mild to moderate Obstructive Sleep Apnea.
ProSomnus devices are the only Oral Appliance Therapy devices to demonstrate efficacy on par with
CPAP for mild to moderate Obstructive Sleep Apnea and adherence that exceeds the recommended
seven hours of sleep per night. Additionally, clinical investigations have shown a mitigation of common
dental side effects, better economics for payers and providers, and patient preference over predicate
devices.
With more than 150,000 devices prescribed, patients report that ProSomnus’s patented devices are
more comfortable, easier to use and less invasive than CPAP therapy and traditional oral appliance
therapy devices. ProSomnus devices cost approximately 2.3 times less than CPAP over a three-year
period and an estimated 20 times less than hypoglossal nerve stimulation. ProSomnus devices are
authorized by the Department of Defense and the U.S. Army.
Obstructive Sleep Apnea is the recurring collapse of the airway during sleep, resulting in oxygen
shortages and abrupt awakenings accompanied by gasping or choking. In addition to daytime sleepiness,
Obstructive Sleep Apnea is associated with serious comorbidities, including heart failure, stroke,
hypertension, morbid obesity and type 2 diabetes. Patients with untreated Obstructive Sleep Apnea are
23 times more likely to suffer a heart attack and four times more likely to have a stroke. It is estimated
that approximately one billion people worldwide and over 74 million people in North America suffer
from Obstructive Sleep Apnea. Approximately 56 million of those 74 million people in North America are
undiagnosed.
About Lakeshore Acquisition I Corp.
Lakeshore Acquisition I Corp. is a blank check company, also commonly referred to as a special purpose acquisition company, or SPAC, formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.
Important Information About the Proposed Business Combination and Where to Find It
This press release relates to a proposed business combination between Lakeshore and ProSomnus. A full
description of the terms of the business combination has and will be provided in a Registration Statement on Form S-4 and proxy statement to be filed with the SEC by Lakeshore. The proxy statement will be mailed to Lakeshore’s shareholders as of a record date to be established for voting at the shareholders’ meeting relating to the proposed transactions. This press release does not contain all the information that should be considered concerning the proposed business combination and is not intended to form the basis of any investment decision or any other decision in respect of the proposed business combination. Lakeshore’s shareholders and other interested persons are advised to read, when available, the Registration Statement on Form S-4 and proxy statement and the amendments thereto and other documents filed in connection with the proposed business combination, as these materials will contain important information about ProSomnus, Lakeshore and the proposed business combination. The Registration Statement on Form S-4 and the proxy statement and other documents filed with the SEC, once available, may be obtained without charge at the SEC’s website at www.sec.gov, or by directing a written request to Lakeshore Acquisition I Corp., 667 Madison Avenue, New York, NY 10065.
Participants in the Solicitation
Lakeshore, certain shareholders of Lakeshore, and their respective directors and executive officers may
be deemed participants in the solicitation of proxies from Lakeshore’s shareholders with respect to the
proposed business combination. A list of the names of Lakeshore’s directors and executive officers and a
description of their interests in Lakeshore is contained in Lakeshore’s registration statement on Form S-
1, which was filed with the SEC and is available free of charge at the SEC’s web site at www.sec.gov, or
by directing a written request to Lakeshore Acquisition I Corp., 667 Madison Avenue, New York, NY 10065. Additional
information regarding the interests of such participants will be contained in the Registration Statement
on Form S-4 and proxy statement for the proposed business combination when available.
ProSomnus and its directors and executive officers may also be deemed to be participants in the
solicitation of proxies from the shareholders of Lakeshore in connection with the proposed business
combination. A list of the names of such directors and executive officers and information regarding their
interests in the proposed business combination will be included in the proxy statement for the proposed
business combination when available.
Forward-looking Statements
Except for historical information contained herein, this press release contains certain “forward-looking
statements” within the meaning of the federal U.S. securities laws with respect to the proposed
business combination between Lakeshore and ProSomnus, the benefits of the transaction, the amount
of cash the transaction will provide ProSomnus, the anticipated timing of the transaction, the services
and markets of ProSomnus, our expectations regarding future growth, results of operations,
performance, future capital and other expenditures, competitive advantages, business prospects and
opportunities, future plans and intentions, results, level of activities, performance, goals or
achievements or other future events. These forward-looking statements generally are identified by
words such as “anticipate,” “believe,” “expect,” “may,” “could,” “will,” “potential,” “intend,” “estimate,”
“should,” “plan,” “predict,” or the negative or other variations of such statements, reflect our
management’s current beliefs and assumptions and are based on the information currently available to
our management. Forward-looking statements are predictions, projections and other statements about
future events that are based on current expectations and assumptions and, as a result, are subject to
risks and uncertainties. Many factors could cause actual results or developments to differ materially
from those expressed or implied by such forward-looking statements, including but not limited to: (i) the
risk that the transaction may not be completed in a timely manner or at all, which may adversely affect
the price of Lakeshore’s securities; (ii) the risk that the transaction may not be completed by Lakeshore’s
business combination deadline and the potential failure to obtain an extension of the business
combination deadline if sought by Lakeshore; (iii) the failure to satisfy the conditions to the
consummation of the transaction, including the approval of the business combination agreement by the
stockholders of Lakeshore, the satisfaction of the minimum cash amount following any redemptions by
Lakeshore’s public stockholders and the receipt of certain governmental and regulatory approvals; (iv)
the lack of a third-party valuation in determining whether or not to pursue the proposed transaction; (v)
the occurrence of any event, change or other circumstance that could give rise to the termination of the
business combination agreement; (vi) the effect of the announcement or pendency of the transaction
on ProSomnus’s business relationships, operating results and business generally; (vii) risks that the
proposed transaction disrupts current plans and operations of ProSomnus; (viii) the outcome of any
legal proceedings that may be instituted against ProSomnus or Lakeshore related to the business
combination agreement or the proposed transaction; (ix) the ability to maintain the listing of
Lakeshore’s securities on a national securities exchange; (x) changes in the competitive industries in
which ProSomnus operates, variations in operating performance across competitors, changes in laws
and regulations affecting ProSomnus’s business and changes in the combined capital structure; (xi) the
ability to implement business plans, forecasts and other expectations after the completion of the
proposed transaction, and identify and realize additional opportunities; (xii) the risk of downturns in the
market and ProSomnus’s industry including, but not limited to, as a result of the COVID-19 pandemic;
(xiii) costs related to the transaction and the failure to realize anticipated benefits of the transaction or
to realize estimated pro forma results and underlying assumptions, including with respect to estimated
stockholder redemptions; (xiv) the inability to complete its debt financing; and (xv) risks and
uncertainties related to ProSomnus’s business, including, but not limited to, risks relating to the
uncertainty of the projected financial information with respect to ProSomnus; risks related to
ProSomnus’s limited operating history, the roll-out of ProSomnus’s business and the timing of expected
business milestones; ProSomnus’s ability to implement its business plan and scale its business, which
includes the recruitment of healthcare professionals to prescribe and dentists to deliver ProSomnus oral
devices; the understanding and adoption by dentists and other healthcare professionals of ProSomnus
oral devices for mild-to-moderate OSA; expectations concerning the effectiveness of OSA treatment
using ProSomnus oral devices and the potential for patient relapse after completion of treatment; the
potential financial benefits to dentists and other healthcare professionals from treating patients with
ProSomnus oral devices and using ProSomnus’s monitoring tools; ProSomnus’s potential profit margin
from sales of ProSomnus oral devices; ProSomnus’s ability to properly train dentists in the use of the
ProSomnus oral devices and other services it offers in their dental practices; ProSomnus’s ability to
formulate, implement and modify as necessary effective sales, marketing, and strategic initiatives to
drive revenue growth; ProSomnus’s ability to expand internationally; the viability of ProSomnus’s
intellectual property and intellectual property created in the future; acceptance by the marketplace of
the products and services that ProSomnus markets; government regulations and ProSomnus’s ability to
obtain applicable regulatory approvals and comply with government regulations, including under
healthcare laws and the rules and regulations of the U.S. Food and Drug Administration; and the extent
of patient reimbursement by medical insurance in the United States and internationally. The foregoing
list of factors is not exclusive. You should carefully consider the foregoing factors and the other risks and
uncertainties described in the “Risk Factors” section of proxy statement, when available, and other
documents filed by Lakeshore from time to time with the SEC. These filings identify and address other
important risks and uncertainties that could cause actual events and results to differ materially from
those contained in the forward-looking statements. Forward-looking statements speak only as of the
date on which they are made, and neither ProSomnus nor Lakeshore assume any obligation to update or
revise any forward-looking statements or other information contained herein, whether as a result of
new information, future events or otherwise. You are cautioned not to put undue reliance on these
forward-looking statements. Neither Lakeshore nor ProSomnus gives any assurance that either
Lakeshore or ProSomnus, or the combined company, will achieve its expectations.
Non-solicitation
This press release is not a proxy statement or solicitation of a proxy, consent or authorization with
respect to any securities or in respect of the potential business combination or any other matter and
shall not constitute an offer to sell or a solicitation of an offer to buy the securities of Lakeshore,
ProSomnus or the combined company, nor shall there be any sale of any such securities in any state or
jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of such state or jurisdiction. No offer of securities shall be made
except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended.
Contacts
Media
Sean Leous
Investors
Mike Cavanaugh
