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BIONOVELUS INC COM USD0.001 (OTCMKTS:ONOV) is Heating Up Again But Fundamentals Still Sorely Lacking

BIONOVELUS INC COM USD0.001 (OTCMKTS:ONOV) is Heating Up Again But Fundamentals Still Sorely Lacking
Written by
Chris Sandburg
Published on
July 21, 2016
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BIONOVELUS INC COM USD0.001 (OTCMKTS:ONOV) closed out the Tuesday session in the US at just shy of a 50% gain to its open, and there's no immediately obvious reason for the gains – that is, nothing fundamental to the company. We do know that this one has been the benefactor of some pretty aggressive promotional activity over the last twelve months, however, and a few newsletters featured Bionovelus as a top microcap pick throughout June. Chances are the promotional activity is set to heat up once more, and this action is a precursor to, or a direct result of, this heating up.That's not to say there's no underlying activity – just that what's under the hood far from justifies the company's current market cap.For those not familiar with Bionovelus, it’s a dev stage biotech going after something called coffee rust, which is a type of fungus that grows on (and subsequently destroys) coffee plants. The economic impact of coffee rust is supposedly somewhere in the region of $2.5 billion annually, so there's plenty of potential revenues for a company that can come up with a solution. Whether that solution is Bionovelus' CR-10 bio pesticide remains to be seen, however.The company served up some pretty vague results data at the beginning of July, reporting that in all tested plants, CR-10 brought rust levels to 0% and maintained these levels for 120 days. The current treatment is toxic (as it needs sulfur mixed in with it to make it applicable to the plants) and it also needs repeat application. What we don't know is how many plants were tested, or under what conditions.Even with these results, the current market cap of more than $27.5 million seems unsustainable. The company reported it had prepared 4,000 bottles of its pesticide back in June ready for shipping to Mexico, but this comes as part of a test shipment so chances are its not getting much, if anything, in the way of sales revenue from the batch. Even if it did, the numbers look weak.Revenues are totally non existent and the company is losing double digit '000s quarterly. At last count, Q1 2016, net loss rang in at a little over $25K. A quarter earlier, the company lost $63K.Bionovelus' balance sheet is even worse.At March 31, the company recorded just $4 cash on hand (yes, $4) and that cash accounted for the entirety of its total current assets. There's $653K worth of intangible assets on its balance sheet, recorded as IP. This is essentially a random number, however, plucked from the number of outstanding shares:

"All research and development costs are normally expensed as incurred. Since there was a reverse acquisition/merger in May 2015 with Firstin Wireless Technology, Inc., those rules change per GAAP. Stock is being issued for the product, the cost of the stock (which is $0.01 per share) becomes the fair market value based on the number of shares. To calculate the fair market value, the number of shares was multiplied by $0.01 to come up with the fair market value."

70 million shares outstanding. $0.01 per share. $700K worth of IP listed as intangible assets.Debt comes in at $205K and accounts payable at $475K. With no revenues and/or cash, just the servicing of this debt will require a capital raise, and the company already has more than $205K outstanding notes payable. Toxic, dilutive raises are pretty much inevitable, and this is a major risk going forward.The bottom line here is that there's just not enough about the company to warrant its market capitalization. There may be some short term trade potential on the back of promotional activity boosts, but until it starts to generate steady (or any) revenues and sorts out its balance sheet, it can't be taken seriously as a long term prospect.Sign up to our free newsletter below and get our current updates on ONOV!Disclosure: We have no position in ONOV and have not been compensated for this article.

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