Why are these shares still trading at 35c given the 10 for 1 dilution that is about to be unleashed ?

Although these shares have not yet been issued, they will be soon, and one might think that a significant drop in the per share value of the company would result. There are two possible explanations I think:

1. There are ‘investors’ who do not understand that all these shares are about to be issued and who will suffer significant losses
2. Since the (effective recapitalisation) was announced (13^th March) there have been a few nice little announcements:
3. Cranial reconstruction and long bone trials showing excellent results (26^th March)
4. Market approvals secured in Vietnam and Singapore for a suite of proprietary products (27^th March)
5. First clinical trials for proprietary proteins that accelerate bone regeneration commenced in Singapore (23^rd April)

Does these announcments justify a huge step up in enterprise value ? I think - not in themselves, but read on.

My view has always been that this is a world class, global leader in medtech, with IP and clinial data in the bag, valued at a pittance. The reasons that they have been so valued is simply that

1. growth has been challenged – however there have been reasons for that, namely:

• covid was a bitch for these guys
• the market has underestimated the time and cost of gaining regulatory approvals, hospital ethics board approvals & market traction

The typical small cap punter expects the moon delivered overnight and that ain't how it works, particularly in healthcare.

1. Cash runway has been a big flag

However look at the quarterly just landed - $726k revenue from $136 product manufacturing and operating costs and significant growth everywhere. And no-one in their right mind would withdraw their rights application now, so the cash position is arguably now fine.

So the second explanation, and my preferred explanation, is that the above problems are basically behind us and the market is belatedly realising this. The only thing the company needs is scale, and that is inexorably coming.

It is also possible that some market particants used the rights trading to position themselves into the stock for these reasons and are still topping up on market. Or alternatively - conspiracy theory alert - that some company-friendly participant is holding up the price to ensure that no rights applications are withdrawn. But either way, the company will get the cash they seek for the runway.

Likely the answer to the question is ‘a little bit of column A and some of column B’ above.

Thinking about a small cap growth play, I would ideally like to see:

- a clear proprietary advantage based on IP (patents and know-how being better than patents alone)

- technology that is demonstrably superior to incumbent alternatives

- technology that has been proven in the field over some years, as opposed to being “nearly ready”.

- very large & directly addressable global markets

- endorsement of technology by industry thought leaders

- a reasonably capital-light operational model

- high gross margins

- little to no debt & sufficient cash for the medium term

- directors holding 10% + of shares on issue

- extensive ongoing research to broaden the product suite/applications being conducted at scale and at someone else’s expense

- a share price that has been hampered by phenomenon that are likely to prove temporary

- clear operational/financial step changes being implemented

- No operational gap between what has been promised and what has been delivered

- despite all of the above, a lower EV/REV than peers

I think that Osteopore ticks every single one of these boxes.

But why take my word for it ? Have a read:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02633224-6A1137097?access_token=83ff96335c2d45a094df02a206a39ff4

I'm not going to venture a valuation except to say that I hold in real life and that it's north of eleven cents.

COVID clearly affecting growth plans and share price has been trending down since the 10% gain from the last significant announcement.

Financial Performance

COVID-19 continued to disrupt global healthcare systems in the fourth quarter of 2021. While Q4 CY21 sales increased 70% on Q3 CY21, the Company continued to experience lower demand in its key markets in South Korea and Vietnam which was only partially offset by sales from the USA, Singapore, and Oman. Osteopore achieved S$307,220 (A$310,798) in revenue for Q4 CY21 and ended the quarter with A$4,530,175 cash on hand. Revenue growth in the USA and Europe increasingly provides a commercial foundation on which to build, with a post-COVID strategy in place to scale. As the current pandemic wave eases, Osteopore expects revenue to gradually return to its pre-COVID levels with increased momentum.

During the quarter, the Company continued to work towards maintaining and improving its margins. A gross margin of 71.2% of sales revenue was achieved in Q4 CY21, reflecting an encouraging improvement over the 61.5% achieved in Q4 CY20. The improvement is reflective of the sale of higher- value implants and the Company believes that its cost effective and high margin manufacturing process will ultimately become a major contributor towards the Company achieving profitability as revenue grows.

OSX share price boosted (up 10%) on announcement

Osteopore secures lead role in Clinical-industrial Partnership with National Dental Centre Singapore and A*STAR research institutes through A$19m project, develops next generation jaw implant to access the A$1.26b dental bone graft and membrane market

The project encompasses the development of a combination product with patented biological additives and polymer compound to enhance the bone regeneration capability and clinical outcomes. Expected outcomes include shorter surgical procedures and faster recovery time for patients.

• Findings from the project will be used to form the basis of Osteopore’s next generation products. The dental bone graft and membrane market has an estimated value of A$1.26b according to Verified Market Research, with 10% of the global dental jaw surgeries conducted in APAC.

• The total contribution by all parties including Singapore’s Foundation centre is A$18.7m, with Osteopore contributing A$1.8m in cash over three years. Osteopore is the industry lead in this project, bringing together three major Singaporean national research institutions, each with the expertise crucial to the execution.

• The translational study builds on intellectual property approvals for Osteopore’s magnesium-composite materials, previously obtained by the Osteopore team in several regions, including Singapore, Europe, and China.

Highlights:

• Cooperation Agreement with Terumo Blood and Cell Technologies to promote and sell both companies complementary regenerative products in Asia-Pacific.

• Terumo Blood and Cell Technologies’ products will be used to concentrate a patient’s bone marrow and mixed into Osteopore scaffolds during implantation.

• The agreement will expose Osteopore products to Terumo Blood and Cell Technologies’ extensive network of blood centres, hospitals, therapeutic clinics, researchers, and private medical practices.

Highlights:

• Fourth consecutive quarter of revenue growth with A$429,700 achieved for Q4 CY20.

• Osteopore achieved revenue of A$1,504,578 for the full 2020 calendar year, marking a 36% increase over CY 2019 results.

• Signed several exclusive Distribution Agreements to promote and sell Osteopore products in Australia and New Zealand, Germany and Austria, Scandinavia, and the Middle East.

• Appointed Ex-ResMed finance executive, Carl Runde, as Chief Financial Officer.

• Recently expanded manufacturing facility now fully operational.

• Cash balance of A$9.0m at 31 December 2020.