Wednesday 26 April 2017 The one stop source for free breaking news, expert analysis, and videos on AIM and LSE listed shares


Has Advanced Oncotherapy broken covenants on Metric loan already - will it be insolvent on March 31 or is it there already?

By Tom Winnifrith, The Sheriff of AIM | Thursday 9 March 2017


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


I am beginning to think that the 32p I invested in buying one share in Advanced Oncotherapy (AVO) may be dead money sooner than I think. The silence on certain matters relating to the £11 million it owes Metric is deafening and leads me to believe that on March 31 this company could be insolvent. Or is it already insolvent?  The first question is whether Advanced has breached covenants on the loan already and so is in technical default, i.e. insolvent. If that is the case investors should be told at once should they not. Perhaps hapless Nomad Stockdale might force a clarification of this matter?

When the loan was first announced on 26 May 2016 Advanced stated:

The Agreement is subject to customary representations, undertakings and events of default and includes financial covenants relating to the future cash balances, revenues and profitability of Advanced Oncotherapy, and to the profitability of LPTC as well as a number of non-financial covenants relating to technological development, delivery of the first LIGHT system and first patient treatment.

Ends.

Ok, so Sinophi says that there is not even a working prototype and meanwhile Advanced now has negative net current assets. It may have drawn down £1.235 million of cash via a death spiral but £1.2 million of loan notes to Bracknor are unconverted and a £740,000 arrangement fee has yet to be paid. So NCA are negative and cash is, I suggest, not great. has Advanced breached any covenants yet? Yes or no? If no, how close is it? What happens then? Does not the £11 million become a current liability in which case is not Advanced trading while brown bread? Over to the hapless Nomad.

Meanwhile back to last May...

Of the £24 million financing, £11 million will be received shortly following signing. The second tranche of £13 million will be available for drawdown on completion of a £25 million cash or capital injection to fund the development of a manufacturing base. Should these milestones not be achieved by the end of March 2017, the initial £11 million tranche will become repayable by September 2017.

Ends.

That £25 million was replaced by a placing for £10 million ( September 2016 days after NED Lord Evans of Watford dumped all his shares) and a pledge to secure £15 million non dilutive funding. That pledge has not been honoured, instead a £13 million death spiral was arranged but it is going to prove impossible to draw down given the illiquidity and crashing share price. Hence I suggest that Advanced will at 31 Mach be in default. Has it discussed this with Metric? How can it hope to repay the loan by September? Does that not make it insolvent?
Again, the hapless Nomad must force an immediate clarification of this matter.

These shares could be suspended pending clarification at any time. Or there could be no problem. There just has to be a statement. But i would not wait for that. Keep one share for a GM bunfight but sell all your others to buy the beer and popcorn for that event. Target price 0p.


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