US Stem Cell Inc (USRM)

[Dragon Lady]

Quote LOL, "The float is extremely low and lenders benefit way more when the pps is up. "

NO, NOT TRUE actually. That is factually incorrect. The type of debt USRM is relying on is known as "toxic" of "floorless" convertible debt (thee SEC's own wording/definition, not mine).

The "lender" in fact benefits MORE, the LOWER THE SHARE PRICE GOES in floorless, convertible debt that is based on a "floating" (non fixed) adjustable conversion formula, that "resets" the lender's conversion price, no matter how low the shares go. Meaning, the LOWER IT GOES, the MORE SHARES THE LENDER GETS on each conversion cycle, wash, rinse, repeat. THAT is how firms like Magna, Daniel James, Fourth Man, etc make their money, and make BUTT LOADS OF IT, creating incredible rates of return (rumored to be at least 25% to 30% very, very short term, many claim they never make less than 50% on their money and typically 100% or more returns in periods as short as 6 months at a time- read Bloomberg piece on Magna).

They are not restricted shares, they're 100% free trading common shares, issued on each "conversion request" AND, the lender gets um at a STEEP, STEEP, STEEP discount to market- they essentially can't lose, and actually benefit from a falling share price.

Here the SEC describes "floorless convertible debt" :

https://www.sec.gov/answers/convertibles.htm

"Because a market price based conversion formula can lead to dramatic stock price reductions and corresponding negative effects on both the company and its shareholders, convertible security financings with market price based conversion ratios have colloquially been called "floorless", "toxic," "death spiral," and "ratchet" convertibles."

Here is a series of letters from the SEC to USRM, requiring them to include further disclosures on the extent of the EXTREME DILUTION, as related to their latest Magna financing deal- the most recent one for approx $260K dollars. NOTICE, the SEC made USRM specifically "spell out" how a falling share price, inversely = the "lender" (Magna) getting more dilution shares issued to them- essentially with no limits. Why does one think that Daniel James and Fourth Man just recently began filing SEC 13G filings, in which they're maxing out at 9.99% shares issued, on each share conversion cycle? The LOWER THE PRICE GOES, the MORE SHARES THEY GET- that's why.

https://www.sec.gov/Archives/edgar/data/1388319/000000000016060760/filename1.pdf

That's thee SEC, asking for more disclosures as the extent of Magna DILUTION from the prior toxic notes they held, before the SEC would approve the share registration statement for the latest round of dilution shares to go to Magna, the $260K most recent deal.

Here's what USRM had to respond and add to their SEC filings as disclosures:

https://www.sec.gov/Archives/edgar/data/1388319/000118518516003574/filename1.htm

USRM writing back to the SEC:

"The sale or issuance of our common stock to Magna Equities II, LLC upon the issuance of the common stock underlying the convertible promissory notes may cause substantial dilution and the resale of the shares of common stock by Magna Equities II, LLC into the public market, or the perception that such sales may occur, could cause the price of our common stock to fall.

In the event Magna Equities II, LLC elects, upon effectiveness of the registration statement of which this prospectus is a part, to convert part of all of the outstanding principal and interest of the convertible promissory notes to the common stock registered hereunder, there will be substantial dilution to the current number of issued and outstanding shares and any sale of such stock may have an adverse effect upon our stock price. The number of shares ultimately offered for sale by Magna Equities II, LLC under this prospectus is dependent upon a number of factors, including the extent to which Magna Equities II, LLC converts the convertible promissory notes into shares of our common stock. Because the actual exercise price for the shares of common stock that Magna Equities II, LLC may receive upon conversion will fluctuate based on the market price of our common stock, we are not able to determine at this time the exact number of shares of our common stock that we will issue and, therefore, the exact number of shares we will ultimately register for resale under the Securities Act. At no time will Magna Equities II, LLC be entitled to convert any portion of the Convertible Note to the extent that after such conversion, Magna Equities II, LLC (together with its affiliates) would beneficially own more than 4.99% of our common stock (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder). Moreover, there is an inverse relationship between the market price of our common stock and the number of shares of our common stock that may be sold following a conversion to common stock.. That is, the lower the market price, the more shares of our common stock that may be issued and sold. Accordingly, if the market price of our common stock decreases (whether such decrease is due to sales by Magna Equities II, LLC in the market or otherwise) and, in turn, the exercise price of our common stock provided in a conversion of the convertible promissory notes to common stock issued to Magna Equities II, LLC decreases, this could allow Magna Equities II, LLC to receive greater numbers of shares of our common stock. Although the number of shares of our common stock that our existing stockholders own will not decrease, the common stock owned by our existing stockholders will represent a smaller percentage of our total outstanding shares after any such issuances to Magna Equities II, LLC. Depending on market liquidity at the time, the issuance of a substantial number of shares of our common stock by Magna Equities II, LLC, and the resale of such shares by Magna Equities II, LLC into the public market, or the perception that such sales may occur, could cause the trading price of our common stock to decline, result in substantial dilution to existing stockholders and make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

In the prior registration statement (SEC File No. 200457), we registered 143,813 (post-split) shares of common stock underlying commitment shares, a draw down equity line, and convertible promissory notes. The number of shares and stock prices listed below reflect post-split calculations. Magna Equities II, LLC was issued 9,109 and 2,891 shares as of October 27, 2014 and December 23, 2014 respectively, representing 1.66% and 0.50% of the then current issued and outstanding shares of our common stock respectively. Our common stock price as of October 27, 2014 and December 23, 2014 was $20.50 and $12.80 respectively. Pursuant to the draw down equity line, we requested drawdowns from January 13, 2015 through August 27, 2015 (which includes issuing true up shares as per the terms and conditions of the Purchase Agreement of the equity line). During this period, we issued an aggregate of 87,813 shares (post-split) pursuant to ten draw down requests initiated solely by us. The percentage dilution for any one draw down or true up represented from 0.35% of the then issued and outstanding shares of common stock to 2.12% of the then issued and outstanding shares of common stock. The price of our common stock was $8.40 as of January 13, 2015 (the date of the initial draw down) to $4.00 as of August 27, 2015 (the date of the final true up issuance). Magna Equities II, LLC converted a portion of its convertible promissory notes on February 2, 2015, receiving 7,246 (post-split) shares of common stock (representing 1.19% of the then issued and outstanding shares of common stock). The remainder of the convertible promissory notes were converted to shares of common stock from August 27, 2015 through November 6, 2015. The percentage dilution for any one conversion during this period represented from 0.82% of the then issued and outstanding shares of common stock to 2.85% of the then issued and outstanding shares of common stock. The price of our common stock during this period was $4.00 as of August 27, 2015 to $1.40 as of October 27, 2015, the second to last conversion date) ($5.45 as of November 6, 2015 (the date of the final conversion). Consequently, during the period covered by the prior registration period, our stock price decreased from $20.50 to $1.40 ($5.45 as of the last conversion). During this time, our number of issued and outstanding shares increased from 548,186 showing 595,198 shares outstanding on 1/13/15 to 1,615,772 shares, partly as a result of the issuances to Magna Equities II, LLC."

Daniel James, Fourth Man, Magna etc (USRM has used many other toxic lenders in the past yr or two - Vis Vires, Asher, etc)- they receive almost a 50% DISCOUNT TO MARKET when they get their dilution shares.

Here is the wording describing some of the latest convertible debt deals, from USRM's most recently filed form 10-Q:

https://www.sec.gov/Archives/edgar/data/1388319/000118518516004395/usstemcell10q033116.htm

PAGE 15:

"Magna Group (during this period)

2015 Note

On December 3, 2015, the Company entered into a Securities Purchase Agreement with Magna Equities II, LLC (“Magna”) for the sale of a 12% convertible promissory note in the principal amount of $262,500 (the “Note”). The Note was subsequently funded in February 2016 upon effectiveness of the Company’s registration statement (see below). Proceeds from the note was $250,000 (less an original issue discount of 5% or $12,500).

The Note bears interest at the rate of 12% per annum. All interest and principal must be repaid on December 3, 2016. The Note is convertible into common stock, at Magna’s option, at the lower of i) 40% discount to the lowest sales price of the common stock during the 5 trading day period prior to conversion or ii) $0.70. In the event the Company prepays the Note in full, the Company is required to pay off all principal at 140%, interest and any other amounts."

Next "toxic" note(s) to Daniel James cause they have more than one with this hedge lender, PAGE 15:

"Daniel James Management (during this period)

2016 Notes

During the three months ended March 31, 2016, the Company entered into Securities Purchase Agreements with Daniel James Management (“Daniel”) for the sale of 9.5% convertible promissory note in aggregate principal amount of $75,000 (the “Daniel Notes”).

The Daniel Notes bear interest at the rate of 9.5% per annum. As of the three months ended March 31, 2016, all interest and principal must be repaid one year from the issuance date, with the last note being due March 9, 2017. The Daniel Notes are convertible into common stock, at holder’s option, at a 47% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Company has identified the embedded derivatives related to the Daniel Notes. These embedded derivatives included certain conversion features and reset provision. (see Note 8).

The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Daniel Notes and to fair value as of each subsequent reporting date which at March 31, 2016 was $113,510. At the inception of the Daniel Notes, the Company determined the aggregate fair value of $139,691 of the embedded derivatives.

During the three months ended March 31, 2016, $50,000 of promissory notes plus accrued interest that were outstanding at December 31, 2015 were converted into shares of the Company’s common stock (see Note 9).

The remaining aggregate promissory notes to Daniel unconverted principle balance as of March 31, 2016 was $100,000."

AND the Fourth Man toxic note(s) as they have more than one with this firm also. Again, notice the steep share discount to market and the floating conversion formula- that's bottomless, meaning it does not matter to the lender how low the share price goes, they just benefit that much more:

PAGE 25:

"
Subsequent financing

On April 22, 2016, the Company entered into a Securities Purchase Agreement with Fourth Man, Inc., for the sale of a 9.5% convertible note in the principal amount of $25,000 (the “Note”).

The Note bears interest at the rate of 9.5% per annum. All interest and principal must be repaid on April 21, 2017. The Note is convertible into common stock, at Fourth Man, Inc.’s option, at a 49% discount to the lowest daily closing trading price of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the Note in full, the Company is required to pay off all principal at 150%, interest and any other amounts."

AND, they, USRM have even sold-off all their future receivables in a "factoring" financing deal- again, at very "stiff" rates and terms. Thus, any future cash coming in, has already been borrowed against (spent essentially) for all intents and purposes:

PAGE 16:

"PowerUp Lending Group, Ltd (during this period)

On March 23, 2016, the Company entered into a revenue based factoring agreement and received an aggregate of $200,000 (less origination fees of $1,650) in exchange for $276,000 of future receipts relating to monies collected from customers or other third party payors. Under the terms of the agreements, the Company is required to make daily payments equal to $1,314 for 210 business days. The Company received net proceeds of $82,896 along with cancellation of the previous revenue based factoring agreement issued in 2015. In connection with the cancellation of the December 2015 revenue based factoring agreements, the Company incurred a loss in settlement of debt of $39,449. The remaining principle balance of the PowerUp Lending Group promissory notes payable at March 31, 2016 is $270,743."

DILUTION, they're issuing out shares by the freaking dump truck full. When they did the 1000 to 1 reverse split in Nov of 2015, there was a little over 1 BILLION shares O/S. That then converted to 1 MILLION approx. As of today, based on the most recently filed SEC 13G by Daniel James, that number has climbed by TEN TIMES, 10X the shares outstanding, to approx 10 MILLION shares, or 10 BILLION shares split corrected and climbing rapidly, on-going, with shares being continually issued, likely weekly to Magna, Daniel James and Fourth Man, based on the SEC 13G filings and based on the fact that Magna can't own more than 4.99% of the O/S shares at any time- so they must convert in increments, sell, then call for another conversion, wash, rinse, repeat until $260K big ones are paid back.

At these kind of share prices- what does it take to pay back Magna, even $100K say, of their remaining debt? The math is simple. Magna gets 40% discount to the lowest of the recent trading price. Which would be anywhere from 1.3 CENTS to 1.5 CENTS the past few weeks. So if Magna calls up USRM and says we want to convert 4.99% of the 10 million or so shares O/S, or approx 490K shares worth, how much debt would that repay?

1.5 cents X .60 (40% discount) = .009 CENTS each, 9/10th of one cent

490,000 X .009 = $4,410.00 lousy bucks worth. It will cost USRM AT LEAST 1/2 MILLION shares to pay back Magna, each $4K or so owed and they owed them $260K as of the last 10-Q filing.

So, even if Magna was converting at 4.99% each week, they'd only be paying back approx. $16K of debt each month. It would cost USRM approx 2 MILLION dilution shares EACH FREAKING MONTH, for 10 months or more- to even make a dent in paying back Magna. That'd be 20 MILLION more shares outstanding being issued, and that IMO, my guess is on the low side. The lower the share price goes- the more shares it's gonna take to pay back Magna.

IMO, the O/S share count will EASILY hit say 20 MILLION, more likely 30 MILLION shares outstanding in less than the next 6 months, easily. Just massive, massive on-going share dilution. The math is simple- it has no bias, it does not lie.

What's gonna suck up or absorb all those dilution shares continually hitting the Ask/sell side of the market, week after week after week?

There's a reason the shares have LOST OVER 90% of their value just since Jan of 2016, 7 short months or so ago. It's never ending FREAKING DILUTION SELLING IMO, as clear as a sunny day, and dilution selling of steeply discounted shares at that. It's not complicated.

Jan 1 2016, approx 65 CENTS per share. 2nd or 3rd week of July 2016, and a new all, all, all time LOW of 1.3 CENTS was made, with substantial volume traded in the 1.5 CENT range.

That's a 7 month LOSS to the common shares of:

65 cents - 1.5 cents = 63.5 / 65 = 0.97 x 100 = 97% LOSS in approx 7 months.

Simple as that.

Here's a little literary coverage on who Magna is, aka Josh Sason- notice the Bloomberg financial journalism piece even contains a well written graphic, explaining in detail how "death spiral" financing works and how devastating it is to the common shares of companies willing to sign-on to this type of desperation financing. The Bloomberg financial journalist explains it quite clearly:

http://www.bloomberg.com/news/articles/2015-03-12/josh-sason-made-millions-from-penny-stock-financing

http://www.zerohedge.com/news/2015-03-12/who-wants-be-penny-stock-millionaire

https://www.bloomberg.com/view/articles/2015-03-12/death-spiral-convertible-financier-has-a-lot-of-fun

Here's a I-HUB board that was built entirely to describe some other "infamous" convertible debt lenders- ole Asher (yes, USRM/Bioheart has used them extensively in the past, see SEC filings) and Vis Vires, who are the Kramer brothers- apparently "notorious" debt lenders on "the street". Sason however seems to be the new "King" of convertible, toxic debt lending according to many articles on the net:

http://investorshub.advfn.com/~-ASHER-~-25451/

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=68247638

A little due diligence on what convertible debt financing is and typically does to common share holders/share price IMO. Known as a share price crusher- pretty much everywhere and every time it's used, per all my own research.

My 2 CENTS worth, for whatever it's worth, which ain't much LOL !!