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Advanced Oncotherapy - is that the whiff of panic I smell at death spiral provider Bracknor?

By Tom Winnifrith, The Sheriff of AIM | Monday 17 July 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.

Shares in Advanced Oncotherapy (AVO ) are again tumbling on this fine summer's day. Oh what joy it is to be alive. 350p at peak ramp less than two years ago, they are now just 10.75p to sell. Ouch, I just love the smell of burning share certificates belonging to Bulletin Board Morons in the morning. So what crisis looms? Take your pick.

On one hand, the "disappearance " of the $150 million order book has left Advanced with zero revenues and a monstrous cash burn. It should have negative net assets and thus be, arguably, trading while insolvent within weeks, if not days. So the fact that the shares are trending - at an ever increasing rate - towards 0p is no great shock.

But there is a second issue at play. Death spiral provider Bracknor has advanced c £3.7 million to Advanced receiving c£4.4 million of loan notes in return. Less than a million quid of these loan notes have been converted into shares to be flogged.

Under a fudged arrangement designed to work around the fact that pat value is 25p, if Bracknor converts a tranche today at 25p Advanced will have to hand over c £55,000 in cash and it ain't got a lot of the folding green stuff in the corporate piggy bank. But unless Bracknor converts pronto and flogs the shares it is going to be badly out of pocket when , not if Advanced, goes tits up.

The fact that the shares are off by another 10% today suggests Bracknor may be starting to panic. It has to start dumping big time soon or else it will drop £2 million or more on this deal and that is not the way death spiral providers like to do business.

Whichever way you look at it, Advanced remains a slam dunk sell. The target remains 0p.

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