💥New Chapter 11 Bankruptcy - ProSomnus Inc. ($OSAP)💥

Sleep apnea-focused biotech files for bankruptcy to effectuate financial restructuring.

On May 7, 2024, ProSomnus Inc. ($OSAP) and two affiliates (collectively, the “debtors”) filed chapter 11 bankruptcy cases in the District of Delaware (Judge Dorsey). The debtors’ business revolves around precision intraoral medical devices for treatment of obstructive sleep apnea — basically a non-invasive alternative to CPAP machines; they did $27.7mm top line in FY’23, up 43% from FY’22; unfortunately, they also lost $24.1mm in FY’23, up from $7.1mm in FY’22. 😬

Interestingly, the significant increase in the debtors’ net loss “…was in large part attributable to public company expenses and the trailing accounting for elements from the de-SPAC transaction, including re-valuation of issued debt and warrants and the earnout liabilities.” Oh yeah, folks, this is yet ANOTHER in a too-long-to-list list of busted deSPACs.*

And whoa boy was this deSPAC a colossal disaster:

Notwithstanding the continued growth of the Debtors’ business, the Debtors’ public listing via de-SPAC in which the funding raised was predominantly debt, resulting in a balance sheet overleveraged with debt structures inconducive to securing additional capital, paired with a challenging capital markets environment, has led to the Debtors’ ongoing and current inability to raise additional capital to fund the company's business plan and/or refinance their current debt structure. In light of the foregoing, the Debtors’ management determined that without additional funding and liquidity, the Debtors’ business would be unable to continue as a going concern and began pursuing marketing and restructuring efforts. (emphasis added).

Brutal. Just like this chart: