19-June-2020:  OSP held their AGM today and rose +22.222%.  Perhaps this Chairman's Address holds some clues...

Their new sales and distribution agreements seem to be working, but they still only managed $600,000 in receipts, which is well short of costs. For example, their staff costs alone are almost $2 million. But the sales trajectory is in the right direction (+20% receipts from customers) and the cost control is also looking better (cash outflows down 23%). It's very much a question of how much more cash they will need before reaching breakeven.

A quick note that it looks like the 4C has a typo in Item 8.5. It seems they've subtracted the cash outflow during the quarter $2,503 from their available cash at the end of the quarter $11,049 to give available funding of $8,546. This then gives them 4 remaining quarters of funding in Item 8.5. Correcting this gives 5 remaining quarters. Not a big change in absolute terms, but it gives them an extra 25% of time before running out of cash, so worth pointing out.

(Disc:held)

OSP is proposing to conduct a 1 for 100 share consolidation, which will be voted on at a meeting on 3/9/21. Fractional shares after the process will be rounded up. Quoting from the announcement, the reasons for the consolidation ("Reverse stock split") are:

• "bring the number of Shares and CDIs issued and the trading price of the Company’s CDIs to a level comparable to the companies in the Company's peer group"; 
• "establish a CDI price that is more appropriate for an ASX listed entity of the Company’s size";
• "the Reverse Stock Split is likely to reduce volatility in the CDI price. Currently, a one cent movement in the security price represents approximately a 71.4%* price movement. Post Reverse Stock Split a one cent movement will represent approximately a 0.7%* change in price";  
• "the Company’s CDIs are more likely to appeal to more investors by increasing price efficiency of the securities and the Reverse Stock Split may overcome mandate restrictions faced by certain  institutional investors unable to invest in securities with prices below A$1.00; and " 
• "a higher absolute CDI price is likely to improve market perception and broaden the appeal of the Company’s securities for more investors."

I would reckon that it's the 4th and 5th dot points that are most relevant to the decision, and so this is probably in preparation for another capital raise.

(Disc: held)

Osprey is an example of a company with a great niche product, solving a particular issue that has no other near-term solution, but seemingly unable to make a viable business.

I used to own, having bought many many years ago, into what I imagined would be a huge worldwide success story. 

It was a great lesson for me on many levels:

• just because it makes medical sense, doesn't mean it will be a commercial success. I have had to re-learn this on several occasions, and has made mextremely wary of delving into the medical space at all.
• Dont average down unless there is clear evidence of financial progress. I bought, and bought and bought. Sales were going up, they were investing in new sales team members in the best target states in the US where their product should be in high demand. There were signs of traction. But over time, and it took me far too long to realise, it became clear the cost of those sales was outpacing the revenue by a considerable margin
• I thought I was cleverer than the market, because it was in my sphere of competence.
• I believed in the turn around story. The contracts with large purchasing organisations ( I think Kaiser Permanente health from memory) and with GE as a re-seller would change everything. It hasnt....yet.
• Hope and loss avoidance. Even when I realised I was in a lemon, I couldnt bring myself to act and pull the pin, hoping somehow that it would pull off a coup.

@Abelian, I hope you have a better outcome than I did, but it would take a lot of evidence that they had gained significant sales traction and were defintiely FCF +ve before I would re-renter. 

Well that's it then. Osprey is "restructuring its business to honour customer, employee and supplier commitment...it is not yet clear whether this plan will result in any retention of value in the Company by its shareholders.''

They expect the restructure to be completed sometime in CY2023 and the shares are suspended from trade until then.

(Disc: held, and now I've got no choice.)

Sorry to hear that, Abelian. I stopped checking up on Osprey some time ago, when it became clear that no miraclE was going to come.

it’s a shame their innovation didn’t have a future. To my knowledge there still isn’t a product out there achieving the goal of reduced contrast volume and hence lower contrast induced nephropathy.

Hope your other investments are having a better time of it.

@Chagsy you've definitely hit the nail on the head. It seems you're a few years ahead of me in wrapping your head around this business, and I wish I'd been quicker on the uptake. My holding is now extremely small (<0.1%) and so I'm just hanging on to see what happens and, as you did, to hopefully learn a few things that will be useful in future.

An update on the 100-to-1 share consolidation: it's all done now, finalised on 23/9/21. Now that the share price is higher (although less than 100x) I can add it to my Strawman porftolio, so I've put in a trade to reflect my holding.

On the same day they also announced that GE are upping their European marketing for the DyeVert system. It's hard to see how this will make a material difference to the company's prospects.

(Disc: held)

So it looks like this might be the end of the road for Osprey. Prior to releasing their most recent 4C they went into a trading halt, which then rolled over into voluntary suspension allowing the company "time to complete its consideration of strategic and funding options... including a possible sale of assets.'' A few days later, they had another announcement, this time saying that they're sacking staff beginning immediately. They don't say how many, but presumably it's a lot.

This isn't any surprise, since in their 4C they had receipts of only USD 411,000 during the quarter, and USD 2.6 million cash on hand, but they spent USD 1.7 million just on staff costs alone in the quarter. You feel bad for the everyone who gets sacked, but they must have seen it coming given these numbers.

That announcement finished off with "The company continues to assess next steps and expects to update the market shortly on further developments." It seems the only real hope from here will be a sale of their technology to a big pharma company or a medical products manufacturer.

(Disc: held --- a very, very small quantity. But at least it hasn't gotten any smaller for a few days!)