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By Nigel Somerville, the Deputy Sheriff of AIM | Friday 18 August 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.
After a stack of RNSs earlier this year, it has all gone quiet at AIM-listed Advanced Oncotherapy (AVO) since the announcement of the termination of the Bracknor death-spiral. How’s the cash position?
We might ask this question because when the Bracknor death spiral deal was terminated it was still sitting on loan notes of around £2.7 million on my calculator. And the last conversion of Bracknor notes came with a heavy price tag, given that it gave rise to £190,000 of fees which were either payable at the time or deductible from the next loan note drawdown. Since that never came, and Advanced seems unlikely to pay back £190,000 when it doesn’t have to, I would imagine that meant that Bracknor was sitting on c. £2.9 million of debt when deal was pulled. Oh..and another £97,500 from commitment fees. So ball park £3m then.
The question over what happened to that debt seems now to have been answered. The assumption was that Bracknor would convert it, but I wondered HERE whether it had simply been paid off – presumably out of the £3.9 million loan facility announced at the same time. With the share price having reached a low point before all this was announced which would have seen Bracknor convert at about 9.25p – but only for 15 days under the original terms, and that time window well past, I think we can assume that Bracknor was paid off. Bracknor isn’t a charity and would have been is a rush to cash in on the cheap conversion with the shares now at 18p.
So it rather looks to me as though of the £3.9 million raised in the funding agreement, the announcement of which saw Bracknor kicked into the long grass, Advanced has only received £0.9 million net of paying off Bracknor – and that assumes no interest paid.
That is barely a month’s cash, judging by the cashflow statement in the last set of annual accounts – and the announcement was a day short of a month ago.
This raises the question of how much cash Advanced actually has. Not much, I reckon.
The other point is that the company has a pile of debts building up from borrowings. This £3.9 million (plus interest at 12% a year) is repayable in two years. An equity conversion package does exist too, provided the company gets away a placing at over 25p before the end of this year. With the stock at just 18p and stacks of warrants outstanding at 25p, one might consider the likelihood of that as being fanciful.
Then there is the secured loan from Blackfinch due in March for £5 million at 12% secured on the Harley Street premises and a further £1.5 million due at the same time which was secured on receivables. The £1.5 million may have been settled by now (although I would have thought we would have been told if that was the case). So it could be £6.5 million – plus interest at 12% so another £0.78 million – could fall due in March.
So how much has Advanced got left now? It can’t do a placing with the shares 8p below the par price of 25p and has secured its Harley Street site against £5 million of loans and has historically been forking out £1 million a month. Something will have to give.
Hell and hand-cart spring to mind, in the absence of a major rabbit being pulled from the hat.
Target price remains 0p – SELL.
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