By Tom Winnifrith, The Sheriff of AIM | Tuesday 13 June 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 have never seen a loan like this. It is sheer desperation from a company that faces imminent insolvency. Make no mistake, Advanced Oncotherapy (AVO) is on the way out and corporate death will occur very soon indeed.
The loan is from Blackfinch which already has security against the company's fixed assets for a prior £5 million loan although these will be flipped to management when Advanced goes bust. The new loan is for £1.5 million and is secured against "known cash receivables" and will be repaid "on receipt of those monies". Advanced has sales of ZERO so what known cash receivables does it have? Quite simply VAT.
Advanced will have collected no VAT since it has no sales but will pay oit on all the works at Harley Street as well as for a raft of professional services such as the fees charged by Walbrook PR for the services of journalist smearing loathsome and discredited PR Man Paul "Queenie" McManus. I am not sure when the VAT quarter end is for Advanced but I would not be surprised if it was May in which case in the next few weeks it will get £1.5 million in from the VAT man and will pay it straight back to Blackfinch ( plus interest of 12%).
This is sheer desperation and tells you that Advanced is quite simply out of cash. And also that as soon as the VAT money arrives it will be out of cash again and will then have no receivables either.
The only hope is that loan shark death spiral provider Bracknor will allow it to draw down another £1.235 million loan note. But Bracknor still has £3 million of loan notes outstanding and death spiral providers are not charities. It can see that the writing is on the wall and will be converting the notes into shares to be flogged as fast as it can. But that raises a new liability in that under the workaround agreed with Advanced the doomed AIM company must pay Bracknor the difference between 25p and what the loan shark can flog the shares for. Right now on a £100,000 loan note that is £40,000 and with the shares set to tank further in the run up to insolvency that potential liability ( currently £1.2 million) is going to grow fast. How to solve that? Bracknor could issue another loan note but net off the liability so pay over nothing then convert and flog the shares PDQ.
All of this is horrible. This is a death spiral on steroids for a company that looks like it could well be out of cash within weeks.
I cannot see how this company is not trading while insolvent. Moreover I cannot see how its auditors can even think of signing off on its annual results which are already late ( they were out on May 31 2016) and which will soon be overdue.
This is a slam dunk sell. The target is suspended pending clarification or 0p and either could happen within weeks.
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