Borislav Tonev

Advanced Medical Isotope Corp. (OTCMKTS:ADMD) Stumbles

by Borislav Tonev April 8, 2016

Advanced Medical Isotope Corp. (OTCMKTS:ADMD, ADMD message board) had quite a run. Between March 18 and April 6, it climbed from just over $0.002 all the way to $0.006 and it smashed its way through several 52-week highs. Yesterday, it slipped by about 15% and it stopped at $0.005.

Many people are now wondering if this is a small consolidation or whether it's a sign of something worse to come. Sadly, only the future can answer their questions. In the meantime, all we can do is see why ADMD experienced a sudden surge in the right direction.

Last month, the management team announced that they have decided to enter the veterinary market by adapting their brachytherapy devices (which have yet to be approved by the FDA) for use on both humans and pets. Then, an entity called Wealthy Venture Capitalist (which receives a monthly compensation of $50 thousand and owns 100 thousand restricted shares) said that ADMD will turn the cancer research industry on its head, and later, SeeThruEquity gave the ticker a $0.02 per share price target.

The people who wrote the positive reports on ADMD seem pretty confident, and investors clearly agree with them, but everyone seems to be ignoring a few things that could threaten the future performance of the stock. The latest 10-Q, for example, is not that brilliant:

  • cash: $7 thousand
  • current assets: $42 thousand
  • current liabilities: $8.9 million
  • quarterly revenues: $12 thousand (coming from consulting services)
  • quarterly net loss: $2.5 million

The company said in the 10-Q that it'll need about $1.5 million to fix some of the more pressing balance sheet issues. It also said that, should the FDA approve them, the brachytherapy devices will swallow between $5 million and $10 million in deployment and commercialization costs. Where ADMD is going to get this sort of money remains unknown.

There's also plenty of toxic debt. Some of it is convertible at the painfully familiar discounts of between 40% and 50% to the market price and some of it has a fixed conversion price of $0.001 per share. Still, some of you might find a silver lining in the current share structure.

The 2 billion A/S count has been all but maxed out which means that the note holders are not in a position to get some cheap common shares and unleash them on the open market. That's pretty easy to see.

Delve deeper into the 10-Q, however, and you'll see that last year, ADMD converted a portion of the debt into preferred shares. Each preferred share is convertible into 1,000 common ones which means that as soon as the room for stock issuance is there, the dilution might come in one huge and rather devastating wave. And the room for dilution might appear very soon.

In December, the majority share holders approved a reverse split at a ratio of between 1-for-100 and 1-for-3,000. Should the company Directors decide, they can effect it at any time before the end of the year. In the Schedule 14, ADMD said that the reverse split should help the company elevate its share price and become eligible for a national exchange listing. It might also open the floodgates for dilution which could have the opposite effect.

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