US Stem Cell Inc (USRM)

[Dragon Lady]

LOL, quote, "You would think that with all this negative talk about toxic financing, some would be happier that the company is trying to move away from it."

What? Move away from it? How's that?

They just did probably a record amount of it (toxic financing, would need to check the past 5 yrs or so of 10-K filings to see if it's a record- but it's as much as ever, if not more than past yrs) in 2014- and they just did qty-3 more, toxic, classic convertible debt deals in just 2015 already (floorless, high interest rate, 45% to 47% share discount, toxic/floorless floating conversion formula, etc) and it's only MID MARCH (KBM again, Fourth Man again and now Vis Vires in just 2015 Jan/Feb), the most recent deal being done in Feb 2015, even adding a new toxic lender to their long list, the "Vis Vires Group"

AND in addition to those qty-3 classic "toxic" style convertible notes- they, BHRT are now already actively tapping the Magna "credit line" facility- purely dilutive and "toxic" via its share discounting provisions and numerous other formulas built into it. BHRT has already given Magna a minimum of about 12 million shares in just "fees" and at least about 20 million shares for an initial "draw" on the credit line- for a total of about 32 MILLION pure, free trading dilution shares to Magna just right there. And that's not even counting if/when the $205K/$307K Magna classic style, "toxic" note begins to get fully diluted- another round of massive dilution will go to Magna from that also.

So what proof is there in any way that they, BHRT are "moving away" from use of toxic, convertible debt, dilution based funding? I don't see a single indication that that is remotely true? AND BHRT has cut their R&D spending to practically nothing (over $550K cut in just 2014 alone)- so what would happen if they even remotely tried to fund an actual FDA type legit, large scale clinical trial? PAID FOR WITH WHAT? I don't even see a trial as a remote possibility at this point IMO- they just ended the yr with $36K total cash on-hand and are already back at the till of qty-3 toxic dilution lenders for amounts like $25K and $38K etc? WHAT would possibly fund some large trial(s) costing minimum $10's of millions to even get close to getting a clinical trial off the ground? Total pipe dream IMO. Not happening that I can see.

They recently signed on to Magna- one of the most notorious penny lenders of last resort, a "toxic death spiral" finance house of high notoriety on the "Street" according to a recent Bloomberg Finance investigative journalism piece- and they, BHRT, in the SEC filings for the Magna deal said they intend to, and need to tap all $3 MILLION of it to advance their "business plans" forward and even that won't be enough (those exact words quoted below direct from the 10-K) - read the original share filing prospectus.

Here is the Bloomberg article and TV interview about Magna-

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

Here is BHRT's own Sr Mgt words from the just filed 10-K, describing all the risks, highly likely dilution and all the rest of it - via their making use of Magna. It's all in the 10-K just filed.

PAGE 35/36 (it basically spells out the risks of the "death spiral" and "toxic" financing scenarios playing out same as the Bloomberg piece and the same as described on the SEC site itself- under "convertible debt")

From BHRT's just filed 10-K PAGE 35/36:

"Risks Related to the Transactions with Magna Equities II, LLC

Funding from our Purchase Agreement with Magna Equities II, LLC may be limited or insufficient to fund our operations or to implement our strategy.

Under our Purchase Agreement with Magna Equities II, LLC, and following December 22, 2014, the date of effectiveness of the registration statement of the shares underlying the Purchase Agreement , and subject to other conditions, we may direct Magna Equities II, LLC to purchase up to $3,000,000 of our shares of common stock over a 24-month period. 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 were offered under the prospectus of the Registration Statement and disclosed in the Purchase Agreement, 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) 12,000,000 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.

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, including the issuance of such shares, 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 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. Depending on the price at which Shares are ultimately sold, we may have to increase the number of our authorized shares in order to issue Shares to Magna Equities II, LLC.

There can be no assurance that we will be able to receive all or any of the Total Commitment from Magna Equities II, LLC because the Purchase Agreement contains certain limitations, restrictions, requirements, conditions and other provisions that could limit our ability to cause Magna Equities II, LLC to buy common stock from us. For instance, we are prohibited from issuing a Draw Down Notice if the amount requested in such Draw Down Notice exceeds the Maximum Draw Down Amount, or 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 the Company’s 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). Moreover, there are limitations with respect to the frequency with which we may provide Draw Down Notices to Magna Equities II, LLC under the Purchase Agreement. Also, as discussed above, there must be an effective registration statement covering the resale of any Shares to be issued pursuant to any draw down under the Purchase Agreement,. These registration statements may be subject to review and comment by the staff of the Commission, and will require the consent of our independent registered public accounting firm. Therefore, the timing of effectiveness of these registration statements cannot be assured.

The extent to which we rely on Magna Equities II, LLC as a source of funding will depend on a number of factors, including the amount of working capital needed, the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding from Magna Equities II, LLC were to prove unavailable or prohibitively dilutive, we would need to secure another source of funding. Even if we sell all $3,000,000 of common stock under the Purchase Agreement with Magna Equities II,
35
LLC, we will still need additional capital to fully implement our current business, operating plans and development plans.

The sale or issuance of our common stock to Magna Equities II, LLC at a discount 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.

Under the Purchase Agreement with Magna Equities II, LLC, and following December 22, 2014, the date of effectiveness of the registration statement of the shares underlying the Purchase Agreement, and subject to other conditions, we may direct Magna Equities II, LLC to purchase up to $3,000,000 of our shares of common stock over a 24-month period. We are registering an aggregate of 143,812,591 (including 12,000,000 shares already issued) shares of common stock in the registration statement of which this prospectus is a part pursuant to the Registration Rights Agreement, representing shares which have been and may be issuable to Magna Equities II, LLC under the Purchase Agreement and shares underlying the Convertible Note we issued to Magna Equities II, LLC. Notwithstanding Magna Equities II, LLC’s beneficial ownership limitation set forth in the Purchase Agreement and the Convertible Note, if all of the 143,812,591 shares offered under that prospectus were issued and outstanding as of the effective date of the registration statement, 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. The number of shares ultimately offered for sale by Magna Equities II, LLC under that prospectus 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. Because the actual purchase price for the Shares that we may sell to Magna Equities II, LLC will fluctuate based on the market price of our common stock during the term of the Purchase Agreement, we are not able to determine at this time the exact number of shares of our common stock that we will issue under the Purchase Agreement and, therefore, the exact number of shares we will ultimately register for resale under the Securities Act.

Specifically, because the per share purchase price for the Shares subject to a Draw Down Notice will be equal to a 7% discount to certain trading prices of our common stock as set forth in the Purchase Agreement, Magna Equities II, LLC will pay less than the then-prevailing market price for our common stock, and the actual purchase price for the Shares that we may sell to Magna Equities II, LLC will fluctuate based on the VWAPs and closing prices of our common stock during the term of the Purchase Agreement. As a result of this discount, Magna Equities II, LLC may have a financial incentive to sell our common stock immediately to realize the profit equal to the difference between the purchase price and the market price. If Magna Equities II, LLC sells the common stock, the market price of our common stock could decrease. If the market price of our common stock decreases, Magna Equities II, LLC may have a further incentive to sell the common stock that it holds. These sales may have a further impact on the market price of our common stock.

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 pursuant to the Purchase Agreement. That is, the lower the market price, the more shares of our common stock that may be sold under the Purchase Agreement. 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 purchase price of our common stock sold to Magna Equities II, LLC under the Purchase Agreement decreases, this could allow Magna Equities II, LLC to receive greater numbers of shares of our common stock pursuant to draw downs under the Purchase Agreement. 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 sales to Magna Equities II, LLC. Depending on market liquidity at the time, the sale of a substantial number of shares of our common stock to Magna Equities II, LLC at a discount to the then-prevailing market price for our common stock under the Purchase Agreement, 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."

Pretty clear to me IMO. It's dilutive and they, the company itself BHRT, just wrote a small "text-book" explanation of "toxic" or "death spiral" financing risks and scenarios playing out IMO, if and when they make use of Magna's "credit line".

WHAT "reduction" is there of BHRT using dilutive, and what's called by the SEC and Bloomberg and other financial sources "toxic" or "death spiral" or "ratchet" financing (THEIR WORDS and NAMES, NOT MINE as previously stated by another poster- that I created a "derogatory label" when those are INDUSTRY RECOGNIZED TERMS)

Where is there any proof that BHRT is "reducing" their use of this type of financing- when qty-3 new deals were just inked in early 2015 and one of those 3 last month in Feb of 2015?? Not seeing it myself- no indication to me of any "reduction in use" of this type of financing? Where and when and how?

Here is a link to thee SEC itself- and they use the term "toxic" and "death spiral" to describe the very kinds of financing deals being discussed, aka "convertible debt" deals- based on "conversion formulas" and typically a "note" and a share discount to the lender of some sort.

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

Quoting THEE SEC:

"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."

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

Bloomberg similarly uses the exact same terms- even has a graph on the left side of the written article - showing a "spiraling down share price" aka the "death spiral" scenario playing out and explained using a graphic.