"It says it includes 87 million shares for part of the $3 million equity
$1,413,783
"
No, that's not what it says. It says the following:
1) They are limited to how much they can draw at any one time. It looks like a max of $500K per draw and can not exceed 9.99% of O/S shares or something to that effect. So, they don't just dial up and ask and get $1,413,783 lickety-split. Not how it works. There would be multiple draws made and the max is $1,282,064, and as they make these "draws", Magna could very well be selling shares on-going, driving the price down, resulting in far less money being received by BHRT. Thus, the dilution table on page 43.
2) It states the 87 million shares AT MOST "could" generate is $1,282,064 BUT, could generate SUBSTANTIALLY LESS, given a multitude of reasons- all in Magna's control:
Page 42, "we would receive only approximately $1,282,064 in gross proceeds. Furthermore, we may receive substantially less than $1,282,064 in gross proceeds"
3) Each time they want to make a "draw" on the credit line- they first must issue a "draw down request" to Magna which triggers a whole bunch of "stuff" set in motion- which then ultimately in the end, determines the actual draw-down price, including something called the "true up" price, which is the final calculation from what I can gather. Again, meaning BHRT could ask for $500K on the line on Monday, a series of events then kick in where Magna gets notified, then lets say Magna sells a big chunk of the 30 MILLION shares they hold now- the price then drops. The price for the 93% calculation would then be based not on the 1.5 cent price on the day BHRT asked for the money, it's apparently based on some final formula that would be effected by the dropping share price, resulting in less money going to BHRT, for more shares issued to Magna. Again, this is what makes Magna who they are. It's the way they make the money they do IMO.
Page 10, S-1 Filing:
"From time to time over the term of the Purchase Agreement, commencing on the trading day immediately following the date on which the registration statement of which this prospectus is a part is declared effective by the Commission, we may, in our sole discretion, provide Magna with a draw down notice, each referred to as a Draw Down Notice, to purchase a specified dollar amount of Shares, which we refer to as the Draw Down Amount, with each draw down subject to the limitations discussed below. The maximum dollar amount of Shares requested to be purchased pursuant to any single Draw Down Notice cannot exceed the lesser of (i) 300% of the average daily trading volume of our common stock for the 10 trading days immediately preceding the date of the Draw Down Notice and (ii) $500,000, which we refer to as the Maximum Draw Down Amount. We may not deliver any Draw Down Notice to Magna if the Initial Purchase Price (described below) with respect to the Shares subject to such Draw Down Notice is less than $0.0025 (subject to adjustment for any stock splits, stock combinations, stock dividends, recapitalizations and other similar transactions) as of the date the applicable Draw Down Notice is received by Magna, which we refer to as the Draw Down Exercise Date."
PAGE 42/43 of S-1 Filing: (the keys to how the whole thing works essentially)
"Once presented with a Draw Down Notice, Magna Equities II, LLC is required to purchase the applicable Draw Down Amount at the applicable Purchase Price. The applicable Settlement Date with respect to a Draw Down Notice will occur within one trading day following the Draw Down Exercise Date. On the applicable Settlement Date for a draw down, we will issue to Magna Equities II, LLC a number of Shares, rounded to the nearest whole Share, equal to (i) the Draw Down Amount that we requested from Magna Equities II, LLC, divided by (ii) the applicable Initial Purchase Price, against simultaneous payment by Magna Equities II, LLC to us in an amount equal to (A) the number of Shares we issued to Magna Equities II, LLC on the Settlement Date, multiplied by (B) the applicable Initial Purchase Price.
With respect to a Draw Down Notice, on the True-Up Date, a calculation of the True-Up Purchase Price and the Purchase Price will occur. On the True-Up Settlement Date, we will issue to Magna Equities II, LLC the Additional Shares, if any, in respect of the applicable Draw Down Notice. Magna Equities II, LLC is not required to return any Shares to us in the event the True-Up Purchase Price is greater than the Initial Purchase Price.
We are prohibited from issuing a Draw Down Notice if (i) the amount requested in such Draw Down Notice exceeds the Maximum Draw Down Amount, (ii) the sale of Shares pursuant to such Draw Down Notice would cause us to issue or sell or Magna Equities II, LLC to acquire or purchase an aggregate dollar value of Shares that would exceed the Total Commitment, or (iii) the sale of Shares pursuant to the Draw Down Notice would cause us to sell or Magna Equities II, LLC to purchase an aggregate number of shares of our common stock which would result in beneficial ownership by Magna Equities II, LLC of more than 9.99% of our common stock (as calculated pursuant to Section 13(d) of the Exchange Act, and the rules and regulations thereunder). We cannot make more than one draw down during the period commencing on any Draw Down Exercise Date and ending on the applicable True-Up Date for such draw down, and we must allow at least two trading days to elapse between the applicable True-Up Date for a draw down and the delivery of any Draw Down Notice for any other draw down.
As of November 20, 2014, there were 560,564,622 shares of our common stock outstanding, of which 554,375,697 shares were held by non-affiliates. Although the Purchase Agreement provides that we may sell up to $3,000,000 of our common stock to Magna Equities II, LLC, only 143,812,591 shares of our common stock are being offered under this prospectus, which represents (i) 31,000,000 shares of common stock that may be issued to Magna Equities II, LLC upon conversion of the Convertible Note, (ii) 9,109,128 shares of common stock that we issued to Magna Equities II, LLC as Initial Commitment Shares on October 27, 2014, (iii) a maximum of 15,890,872 shares of common stock that we may be required to issue to Magna Equities II, LLC as Additional Commitment Shares and (iv) 87,812,591 shares of common stock that we may issue to Magna Equities II, LLC as Shares pursuant to draw downs under the Purchase Agreement. If all of the 143,812,591 shares offered under this prospectus were issued and outstanding as of November 20, 2014, such shares would represent approximately 20.7% of the total number of shares of our common stock outstanding and 20.9% of the total number of outstanding shares of our common stock held by non-affiliates, in each case as of November 20, 2014.
42
At an assumed purchase price of $0.01460 (equal to 93% of the closing price of our common stock of $0.01570 on November 10, 2014), and assuming the sale by us to Magna Equities II, LLC of all of the 87,812,591 Shares, or approximately 15.7% of our issued and outstanding common stock, being registered hereunder pursuant to draw downs under the Purchase Agreement, we would receive only approximately $1,282,064 in gross proceeds. Furthermore, we may receive substantially less than $1,282,064 in gross proceeds from the financing due to our share price, discount to market and other factors relating to our common stock. If we elect to issue and sell more than the 87,812,591 Shares offered under this prospectus to Magna Equities II, LLC, which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional Shares, which could cause additional substantial dilution to our stockholders. Based on the above assumptions, we would be required to register an additional approximately 117,666,849 shares of our common stock to obtain the balance of $1,717,936 of the Total Commitment that would be available to us under the Purchase Agreement. We currently have authorized and available for issuance 2,000,000,000 shares of our common stock pursuant to our charter.
The number of shares of our common stock ultimately offered for resale by Magna Equities II, LLC is dependent upon a number of factors, including the extent to which Magna Equities II, LLC converts the Convertible Note into shares of our common stock and the number of Shares we ultimately issue and sell to Magna Equities II, LLC under the Purchase Agreement. The following table sets forth the total number of Shares that would be issued at varying purchase prices for us to receive the entire $3,000,000 in gross proceeds under the Purchase Agreement (without accounting for certain fees and expenses):"
The table:
" Proceeds from the
Total Number of Percentage of Sale of Shares to
Shares to be Currently Magna Equities II,
Assumed Average Issued if Outstanding LLC Under the
Purchase Price(1) Full Purchase Shares (2) Purchase Agreement
$0.00365025 (3) 821,861,516 59% $3,000,000
$0.0073005 (4)410,930,758 42% $3,000,000
$0.01095075 (5)273,953,839 33% $3,000,000
$0.014601 (6)205,465,379 27% $3,000,000
$0.01825125 (7)164,372,303 23% $3,000,000
$0.0219015 (8)136,976,919 20% $3,000,000""
Right in that table, is the scenario for example, where if Magna can get the share price to just under 1 CENT a bit, say .007, then it's gonna be 410 MILLION shares dilution, minimum to draw-down the entire $3 million over 24 months. They include the scenario where as much as 821 MILLION shares may end up being used, if the price were to be dropped to .003 per share. Why would they put that in the document, unless it's a possibility and needed to be disclosed? Maybe Magna knows that historically, it's not unusual to see a price collapse that far once these draw-downs and share dilution and share selling by them begin to take effect? A company, IMO, wouldn't just toss those numbers in there for no reason, why? Also, why did BHRT take their A/S to 2 BILLION? It's starting to become pretty clear to me, IMO. Real clear the way I see it.
