US Stem Cell Inc (USRM)

[Starbase9]

The reduction/elimination of this debt instrument in itself is not a bad thing, if we look at it as a stand alone event, IMO.

But these things are never stand alone...

So we also should consider a bigger possible picture. The elimination would be good, immediately, if that debt had been partially serviced, meaning eating away at cash flow, which I imagine was not the case, or if imminent legal action was on the horizon, which we don't know, but also doubt at this point, as a record would come up somewhere.

From my experience, negotiating debt pay downs, settlements is a sign of a very scary broader picture, because this agreement may preclude, in all likelihood, the company from finding more cash on the credit market, at reasonable terms, hence why we've seen the Asher notes for example. This reduced access to credit can stick around long after cash flow has been stabilized, inhibiting growth.

Furthermore, it's a proof point of a very tenuous cash flow position for a company or individual, beyond what we're seeing on official filings. Settlements are often a sign of a last ditch effort when one still believes in the light at the end of a tunnel or they can be preemptive actions to easy a BK proceeding by eliminating creditors prior to filing.

On the other hand, the settlement can be a good thing, if the company is finding other sources of free cash flow through net revenue or equity placement, and if there is a very disciplined strategy to eliminating the debt that "is being serviced" (most inhibiting to cash flow), which given this situation may be way harder to do than imagined.

Again, for me this is all a guessing game until a major milestone like an FDA approval is reached.

In the meantime, I'm watching out for other news from the company or their creditors, agreements, default accelerations, legal actions, potential new investors (we never know), etc so that I can paint a clearer picture as we move through 2014.

For now, I get the sense this is a make it or break it year for BHRT, and I'm still holding on, manning the deck, setting the sails...